The 8 Steps to Wealth

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LindaJones

Editor’s note: I promised to add more financial advice this year and I want you to hear from the experts.  This is a guest post from Linda P. Jones, a real-world wealth builder.  Her super skill is simplifying financial advice and helping people build wealth.  She knows her stuff.  Linda both walks the talk … and … talks the walk, as an author, speaker and coach.

What I like about Linda is not just her real-world experience, but that she comes from the right place.  She likes to share what she knows and she likes to see people succeed.  I also like the fact that she’s not focused on get-rich-quick, but instead, get-wealth-smart … through changing your mindset, modeling success, and learning from the best.

Without further ado, here’s Linda on the 8 Steps to Wealth …

Have you ever been fascinated by how to build wealth?  Wondered why some people become wealthy and others don’t?  From a young age, I read and studied millionaires and investing, looking for the answers to those questions.  I read Think and Grow Rich when I was 10 years old.  I got a Business degree, became a Certified Financial Planner (CFP), and spent 28 years in the financial industry, because I wanted to know how to build wealth.

Although I learned a lot about investing from my education and work experience, it didn’t teach me how to accelerate wealth building.  If it had, then every stockbroker and financial planner would be wealthy.  I learned a lot from reading books by famous millionaires like John D. Rockefeller, Andrew Carnegie, and J. Paul Getty, and I noticed they had eight steps in common while building wealth.  Interestingly, some of the principles I learned from the famous millionaires were opposite to what I learned in the financial industry.

At age 27, I wrote down the 8 steps and created my own “8 step wealth blueprint” that mapped out how I would become rich.  I followed the steps, and by age 38 I was worth a million dollars. The following year, I made a million dollars in one year.

The 8 Steps to Wealth

Although it requires time and effort to really master this, I will tell you The 8 Steps to Wealth and let you know how you can learn more.  They are:

  1. Develop a Wealthy Mindset
  2. Build a Nest Egg
  3. Find a Mentor
  4. Invest in a Money Engine
  5. Compound at a High Rate
  6. Leverage for Higher Returns
  7. Protect Your Wealth
  8. Give It Away & Create Your Legacy

STEP 1.  DEVELOP A WEALTHY MINDSET

Having a wealthy mindset is the first and most important step, because it is the foundation.  What you believe about wealth is your reality.  If you don’t believe you can become rich, you can’t.  If you believe you can, you can.  It’s that simple, but it’s not easy.
There are many pieces to having a wealthy mindset.  You must make a decision you will become wealthy, have persistence, change your mental blocks, live outside your comfort zone, visualize the end in mind, and have an attitude of gratitude.

Making a decision is the starting point that propels you into action, but you must be decisive and committed.  A recent example is Donald Trump.  When he was asked what would happen if he lost his all money, he responded, “I’m always going to be rich and that’s that.  Next question.”  As you can see, he has zero doubt.  He is decisive and committed to being rich.

Many people start on the road to wanting to become rich, and then they give up.
THAT is exactly what separates the rich from the non-rich.  Persistence.  Losing faith that you can do it is a common problem with those who are not rich.  They never really believed they could do it, so they sabotage themselves and sell their stock low, quit their dream, stop writing the book, declare bankruptcy, etc.

One example of visualizing the end goal in mind is the actor Jim Carrey.  Before he was famous, he took a check from his checkbook, made it out to himself for $10 million, and put a date on it a few years into the future.  He carried it in his wallet and looked at it every day.  A few years later, he reportedly was offered $10 million for a movie role at almost the exact date he had written on his check!

I’m not saying all you have to do is think about it. If you’re starting a journey, you must  take the first step to get going. You can always revise your path later if you get off course.  Don’t expect success to happen in a straight line, or perfectly, or that it will be easy.  You will be tested to see if you are willing to do what it takes to get rich and in so doing, you have to face fears, get out of your comfort zone (which creates major mental blocks), and improve yourself and your skills. Just get started!

STEP 2. BUILD A NEST EGG

You must have a plan to get where you want to go. The plan will begin with deciding how much wealth you want to have, how you plan to get it, when you will have it, what you plan to give in return.  You must begin to accumulate or borrow capital for your nest egg to start your wealth building.  John D. Rockefeller worked as an accountant and although he made a meager living, he was able to save a sizable nest egg to begin building his fortune.

STEP 3. FIND A MENTOR

Finding a mentor or guide is one of the secrets that can shorten your road to wealth.  Imagine you wanted to go to a foreign country.  You’ve never been there before.  They don’t speak English and you don’t speak their language.  You plan to stay for a month and look forward to seeing the best sites and eating in the best restaurants.  How much easier would you be able to find your destinations if you had a translator?  Would it not make the difference between enjoying yourself and being completely frustrated and lost?  Would it not cut the learning time dramatically?  That’s what it’s like to have a mentor or guide.  Someone to translate for you, shorten the learning curve, and show you the ropes.  They help you avoid making dumb mistakes and getting lost.

Find a mentor or guide who is a millionaire (or billionaire) and learn from them by reading their books, following them on Twitter and Facebook, and hiring them to coach you (likely online).  Invest in yourself and your financial education, it’s worth it and so are you.

STEP 4. INVEST IN A MONEY ENGINE

Investing is simply the “money engine” to take you to your destination.  There are many different types of investment vehicles that are money engines and there is no “right” one.  Just like if you want to get from Los Angeles to New York City, you can ride different vehicles like a motorcycle, car, train, bus, or plane.  The speed with which you will arrive at your destination depends on which vehicle you choose and how fast it is traveling or, in this case, growing.  If you’re in a hurry, look for a low cost/high return money engine, like an internet business which can compound your money at a high return.  To build wealth quickly, you want the investment you choose to create a high rate of return.  That rate times your “nest egg”, compounded, is what will grow your wealth.

Andrew Carnegie said, “The way to become rich is to put all your eggs in one basket and then watch that basket.”  Think oil in the 80’s, technology in the 90’s, and real estate in the 2000’s.  Investors that were concentrated in the right sector created huge wealth.  Those who concentrated in the bubble while it was growing made a fortune.  The difficulty is knowing when to sell. There are signs when bubbles are topping, you just have to learn how to see them.

Historically, most millionaires made their first million in their own business or in real estate, but also in stocks, stock options, oil, and commodities. It depends on the timing of the trends and business cycles.  Don’t look to the past for the next high growth money engine, look to future trends.

Two angel investors formerly from Google concentrated their cash in what they knew — search technology, mobile computing, and the consumer Internet: Twitter, backed by former Google executive Chris Sacca, is the hottest startup in Silicon Valley, pioneering a new field of real-time communications and search provider Powerset, backed by Aydin Senkut, a former Senior Manager at Google, was acquired by Microsoft in 2008, and its technology became a key part of the Bing search engine.

STEP 5. COMPOUND AT A HIGH RATE

Einstein was right, compound interest is the “Eighth Wonder of the World!“ Compounding  means your money earns interest, and the money you earn on your money earns interest.  The formula is: Money x Time x Compounding rate = Wealth.  Compounding starts out slowly, then becomes a parabolic curve.  The more time you have, or the higher the rate you can compound money consistently, the faster you will build wealth.  Even a small amount like $10,000, when compounded at 100% (yes it’s possible), will become $1 million in only eight years.

STEP 6. LEVERAGE FOR HIGHER RETURNS

Leverage or borrowing money and using other people’s money, increases the compounding rate.  For example, if you have $10,000 to invest and it increases by $1,000, you have a 10% return.  But if you put $10,000 down on a $100,000 property and it grows by 10% to $110,000, you’ve made 100% (a $10,000 gain on $10,000 invested).  So leverage can dramatically raise your rate of return and hence, compound your money quicker.   You need to use leverage sparingly, time it right, and be prepared to “de-leverage” quickly if necessary.

STEP 7. PROTECT YOUR WEALTH

A wealth builder can leverage to build their wealth, but once it’s built, they need to eliminate the leverage to keep and protect their wealth. Once you’ve achieved wealth, it’s important to pay off your debt and diversify.  It’s a two-edged sword.  If you’re leveraged and your investment declines, it can go down twice as fast.

Like the disaster that happened to Aubrey McClendon, CEO of Chesapeake Energy in 2008.  Fortune magazine listed his wealth at $2.1 billion, almost all of it in his company’s stock.  He borrowed money from a brokerage firm’s margin account and leveraged 30 million shares of his company’s stock.  In the first 6 months, the stock skyrocketed from an average cost of $55 to $74.  But soon the natural gas market collapsed and he received margin calls, forcing him to sell his stock to pay off his loan.  The stock slipped to $11 in only 90 days and he lost more than a billion dollars almost overnight.  He built wealth by concentrating and leveraging, but didn’t protect his wealth.

STEP 8. GIVE IT AWAY & CREATE YOUR LEGACY

Giving money away to the less fortunate attracts more money back to you.  You are signaling to God, the divine, or the Universe that you have more than enough and you can be trusted to be given more to do good things for others. In turn, it will bless you with more money for your giving.

Why do you think the wealthy usually have charitable foundations?  Besides the tax benefits, they know this to be true.  In addition to money, give away time, free items, free consulting, etc. and watch the money flow back to you!  Focus on how you can help others, not what you can get.  When you feel you have enough to give, and you give to others, you feel more abundant, and you will attract more money.

Using your passion to help others is another way of giving back. It’s my passion to share my life’s work with others and guide them how to build, protect, and maintain wealth.  The financial industry has made wealth building much harder than it needs to be.  It’s my pleasure to share with others how to make it more simple.

The 8 Steps to Wealth became my blueprint for creating wealth and I’m sharing it with you so you can too.

34 COMMENTS

  1. Linda, fantastic post. I like #1 and #8.

    #1 – You become what you set your heart/mind on.
    #8 – Finally someone else gets it! My friends think I am nuts for giving 10%+ of my revenue for Impacta year over year to charities. And year over year I am surprised with how much more I am blessed with. Coincidence, maybe, but I am not complaining 🙂

    Great stuff Linda,

    –Kevin

  2. #1 clicked with me very strongly. Visualizing end result in mind is great driver, and it worked for me in other areas, other than finance. Let me try it with finances too 😉

  3. Thanks for the intro J.D. Great tips. I love the one on protecting your wealth. Personally I think debt is the big enemy. People jump into it and regret it for years to come. Financial freedom is the key to living your dream life and too many people saddle themselves with debt – a ball and chain that stops them from getting the life they really want.

  4. Excellent insight. I really like your piece on Consolidating and protecting one’s wealth. Being in the groove, and making good money can sometimes be overwhelming – to the point of losing one’s bearing. This should serve as a very good guide for one and all.

    Thank you!

  5. Excellent tips. I love the attitude and mindset that comes along with the actions. Becoming super wealthy used to be my only goal, and only recently when I have relaxed more and started focusing on what I like have I found true happiness – and the wealth is taking care of itself, and moving in the right direction. Keeping ourselves educated (the mentor bit) is key too. Thank you, great stuff…..!

  6. How does one find that money engine that works for them? Is there something to be said for wealthy people enjoying their investments or is it a sacrifice generally? Are wealthy people generally more fulfilled than poor people?

    I’m just wondering on those few points as I do get most of the rest of the post but just wondered on these few other points.

  7. Hi JD and Linda,

    Absolutely the best financial list that I have ever read! A wonderful combination of creativity and logic. Thank you so much for sharing Linda’s wisdom with all of us.

    Everytime I read that story about Jim Carrey (I have read it over fifty times), it gives me goosebumps. Visualization is such a vital tool. Combine it wisdom and hard work….and anything is possible!

  8. Well written article. I especially appreciated the derived set gleaned from the cross-section of success stories. It really mounts the concepts on a firm foundation.

  9. Hi JD and Linda .. what a great guest poster .. in both ways?! & that will be really helpful to have some more financial ideas on your blog – though it’s great as it is.

    Thanks Linda – your points are well made and set out .. and confirm you knowledge .. it’s been good to hear from you and to have 8 succinct steps to wealth .. it’s being sensible at the beginning and always protecting, not risking in a silly way – common sense approach ..

    Have good weeks – Hilary

  10. Great post and post idea, J.D. Thank you. I shall follow Linda to learn more.

    Finding the engine may be the single biggest challenge.

    My ignorance shows broadly whenever the word leverage is used. I know what a lever is, and basic machinery. (Learned that in elementary school science.) But as Linda uses it here, its meaning eludes me. (I read it all the time and have never had a visual to understand it.)

  11. Barbara,

    The leverage I am referring to is debt, just like the mortgage on your home. It allows you to compound at a higher rate and grow wealth faster, but must be paid off when you reach your goal or before the “money engine” cycle changes so you protect what you have.

    Linda P. Jones

  12. Thank you, J.D., for publishing my article and to Tracy Emory for connecting us! Thank you all for your kind comments.

    J.B.: One finds a money engine by their goals, risk tolerance, talents, and passions. It is also possible to identify excellent future money engines based on trends and cycles that reappear in the economy. Often these mainstream trends develop into bubbles like tech stocks did in the 90’s and real estate in the 2000’s and you can build wealth by identifying them early. I mention some of them in my audio interview available at http://visionarywealthnow.com.

    • I’m 23 and I’m always trying to figure out new ways to pinch penny’s and save more and put away. And these tips surly helped but I’d love to know more and be less stressed out. I’m a server and there are nights that aren’t so great. I’d love to some how get ahold of the aurthor and talk more to her about my problem

  13. Very good points here J.D on topics concerning wealth. I am steadily in the process of taking a lot of those actions you mentioned here with gradual results. I can say too that patience and persistence is also a primary idea that continues to show up along with the great tips you suggest here.

  14. @ J.B. asked: How does one find that money engine that works for them? Is there something to be said for wealthy people enjoying their investments or is it a sacrifice generally? Are wealthy people generally more fulfilled than poor people?

    You find a money engine by looking at your goals, resources, risk tolerance, and also your talents and passions.
    Yes, wealthy people enjoy their investments! When you are wealthy you can invest in what you love (if you didn’t make your fortune by doing that already) and your additional money engines can combine with your hobbies such as art collecting, antique car collecting, etc. Ultimately, giving money away to others creates a lot of satisfaction and joy, whether it’s to the less fortunate (which I prefer) or a wing for a museum, it is a very fulfilling experience and creates a legacy, which I believe most people have an innate desire to create.

    @ Kevin – Great job!

    @ Alik – Yes, it works the same way!

    @ Annabel – Debt can be good or bad, it depends on how you use it. Many millionaires created businesses by taking loans from credit cards. The difference is, they used it to create a business that was a money engine and could pay off the debt!

    @ Praveen and Farnoosh – Well said.

    @ Nadia – it astounds me too!

    @ Hilary @ Paul – Thank you!

    @ Baker – Patience and persistence are indeed part of a wealthy mindset!

  15. Thanks Linda!

    This is so much amazing information. Truly, thanks for sharing it all. I love your story too…it’s incredibly inspiring.

  16. This is an awesome article, thanks Linda and JD! “You must be decisive and committed” – so true. Our dreams are almost always just decision and commitment to that decision away.

  17. @Belinda – Giving money away definitely creates more wealth! Glad you agree!

    @Elizabeth – It’s my pleasure.

    @Lana – Making the decision to be wealthy is huge!

  18. Thanks so much for sharing this information from Linda. I am inspired and look forward to reading more guest posts from her in the future.

    Write on!~

    Lisa

  19. “Think And Grow Rich” at age 10!! Linda, you are a wonder, through and through! I was heavily into Nancy Drew at that age.

    I so agree wtih all these points, and stress that point Number Eight is maybe the most important — it is an attitude of gratitude and generosity that allows the soul to be freed up to make wise choices and be happily prosperous. Sending out good energy from a kind place ALWAYS comes back bigger and better.

    How great to meet you, Linda! I am a big big admirer of J.D. and all this blog stands for!

    Take care,all!

    xo

  20. @ Lisa – Thank you!

    @ Jannie – I liked Nancy Drew then too! An attitude of gratitude is certainly part of the wealthy mindset foundation and, I agree, is very important!

  21. I’m glad you included “give it away” as the last one. Too many times we build wealth thinking it will make us happy, but we forget the most important tool that happiness provides – helping others.

    It’s why Bill Gates seems so at peace with himself. He stepped on a lot of people to get to where he is, but he is now gaining that Karma back. He is probably now way into the positive.

  22. @ Karl – Giving back both increases your wealth and increases your happiness! It tells the Universe you are using your money to help others and as a result, more flows to you. Giving money away also can be our legacy, such as Bill and Melinda chose with the Gates Foundation.
    If you want to build more wealth, give it away!
    Linda

  23. Good advice Linda,

    My issue has always been point 3 and point 4. The interesting thing for me is that my father is very financially successful, but his methods took him 30 years and I don’t enjoy doing what he did to get there (high salary in upper management and then diversified investments). I’ve been looking for something faster, but hit the other end of the spectrum and ran into ponzi schemes. Fortunately, I tested these with a small bit of money like testing rocks when walking across a river. Put a little weight on them, wait and see if they sink. They did.

    So I’m actually realizing that trying to reproduce what my father has done probably isn’t going to work for me. I have to recognize better options for me and have the courage to try them.

    And I like the last point about giving it away as well. For a time in the 1990s, I rode the Microsoft stock wave. Some of the most satisfying things I’ve done in my life was being able to simply give large chunks of money to people when they needed it. For a friend with cancer or strangers for personal growth seminars.

    Taking a look at your website.

  24. @ Rob – I’m so glad you brought up the “getting rich slow” strategy. It’s slow because people diversify too early and don’t invest in the best future trends. Andrew Carnegie taught me to concentrate – in the trending money engines at the right time – to build wealth. I made my first million in tech stocks, then in real estate. I exited real estate in July 2007 and am on to the next huge trend. By being in the right trend at the right time, you can avoid ponzi schemes which promise a lot, but can’t deliver. Listen to the audio on either of my sites to learn how to identify bubbles and bubble peaks. There are currently three new bubbles forming that I have identified for the next decade.
    Linda

  25. Hi Linda..This sounds like a great piece of advise but to me it is a bit vague. It assumes that you know the system that you operate in very well a priory, which is not the mass case,therefore this is difficult to universalize. Second if you don’t play the game in a system that is able to generate wealth(Money)there simply is no environment in which to practice the system. Third this is a good abstract design for a chosen few,who can allow themselves the luxury to participate, apart from their firm belief and desire to accomplish what they are pursuing.
    Not speaking in terms of miracles, to manage to design such a system out of nothing and get it performing to me is a complex process that may take a while before it starts paying of with your personal measures of success.How will you apply your know how if you have to make that money legitimately in The Eastern Economies,starting from a scratch ?

  26. @ Michael – The first step is having a wealthy mindset. If you don’t believe you can become wealthy, then you’re right. First I would focus on positive statements you can read daily (affirmations) that it can be done. I realize not all countries have equal opportunities to create wealth, but the principles are still the same. After having a wealthy mindset, you need to save and create a nest egg to invest so you can have your capital work for you. Millionaires have been made in poor countries, during hard times, and many millionaires were created during the Great Depression. John D. Rockefeller made a meager salary at $700 annually, but was able to save $1,000 to invest in a business and begin his enormous fortune. Where there is intense desire and commitment to building wealth, much can be accomplished. When I was working on my first million, I got up at 4am every morning to research stocks and investments before commuting an hour, working at a stressful job for 10 hours, and coming home to take care of my family. I was still able to accomplish my goal. You can too.
    The next investment opportunities are formed from being out of favor for years, gaining traction under the radar, and then becoming a frenzy once the crowd discovers them. This is not a one-time occurrence, it’s human nature, repeatable, and predictable, just not widely taught. There are many money making opportunities before us, but they are not the traditional ones. I invite you to read my free Global Institute of Visionary Wealth blogs and become more familiar with my teachings on future trends.
    To your prosperity,
    Linda

  27. wealth building should be the priority of most people not just leisure and playing some online games and stuffs like that,:’

  28. Aloha Linda, great coverage on your financial post. I watch the stock market and it’s sort of strange how it operates, because at times these financial analyst seem like their weather reporters, the market is so unpredictable. And I notice when there is one incident occurring some where in the world and the analyst mentions it, the market goes crazy based on peoples emotions. At times, everything sound perfect, and the stocks are going down, just weird. I enjoyed your information and very encourage-able. Glad I came by and thanks for sharing. Lanikee.com

  29. I love your practical advice and intend to point my clients to this article. So happy that you talk about the proper mindset. This article is a nice supplement to my blog post “7 Steps to Fiscal Wealth and Prosperity”.

    Rachel Lavern
    Personal Transformation, Enlightenment and Development Coach
    “Live without limits because nothing is impossible to you.

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