26 Jan How Do I Build Wealth and Success?
Wealth and success come from consistently providing value to yourself and others. As you feel you’ve plateaued, changing a few things along these lines may help:
1. Use compounding interest
2. Leverage networks
3. Exercise dscipline
1. A key to wealth is understanding compounding interest. This applies not just to money but also time. Time is the great normalizer. To get a leg up, find ways of compounding your precious time.
A good analogy is how a rocket gets a payload to orbit. To reach orbit, the rocket has to reach escape velocity. It has to accelerate quickly to get to a high enough velocity to escape the earth’s pull. Once it hits the critical threshold, the escape velocity, the energy needed is much less and once it reaches orbit only slight boosts are needed to keep it there. The only way to get to esecape velocity is to accelerate, each second going faster than previously.
Just as our earth has a constant gravitational pull, our economic system has its baseline cost and friction that constantly pull you back to where you came from. As you’ve experienced, bills, mortgages, childcare, distractions in life — everyone and everything — show up and try to take a piece from you. You need to reach escape velocity where the effort to grow wealth is minimal.
One way to achieve acceleration is this: outrun it. For every day from now on, set a goal to do just a little bit better. Be just 1% faster at day-to-day tasks. Be just 1% betterevery week at your job. Save just 1% more every month. After enough days you will see a doubling. Then a quadrupling. Then a 10-fold increase. Be consistent.
Better yet, do 2% better daily, or even 3%. After just 200 days (all the working days in one year), if you can grow yourself 3% daily, you’ll be 50x better after a year than putting an extra 1% in daily!
2. Grow value for a large network of people. Individuals can only go so far. and tight networks make you better but their reach and resources are limited. Wealth accumulates when value comes from you and reaches others.
Once you’ve maximized the value you can provide others in your existing network, you need to branch out to add value where others you know less well need it.
Take for example the immigrant mother, who knows how to get her kids from place to place and keep them doing their homework and excelling at school, and can keep them on top of their myriad activities. She is a whiz at logistics. Given just the right opportunity and a bit of training she could manage a supply chain and a complex workforce for a multinational company. In the two roles, many of the skills are the same, but the reach and impact are different.
Branch out and connect with new people. Always try and help and figure out something they might need, and if it’s not much trouble to you just give it to them. Introduce them to others who can help them and help them grow their networks. New opportunities will come back to you that you never knew existed, and your already healthy approach to risk will help you to take advantage and bring wins to both you and others.
3. The stuff above doesn’t work unless you consistently practice it. In marathon running the way to a fast time is to pace yourself. Pick a sustainable pace and stick with it, and keep that speed as close to your target average speed as you can. You get to mile 26 faster going a steady pace than if you repeatedly sprint and rest.
Similarly, compounding doesn’t work unless your daily +1% is added the +1%’s for all the days preceding it. make sure you rest when you need but keep focus and daily improvement. Since you currently have very little debt, things will quickly grow.
The same applies also to your work and professional life. Make those deposits into yourself and others and be disciplined and consistent. Your investment will pay off.
I’ll quickly add that one of the hacks to be successful at this discipline is to automate things. Make it so that you don’t have to think about how to add that 1% every day, it just happens. For example, set up your bank account to automatically put $250 in an interest-bearing account every month and don’t look at that account again for 10 years. Every year put the maximum in your Roth IRA and invest it in index funds in strict increments over the year.
After a time you will find things get easier and you will have the chance to focus more and more on things important to you. You’ll have reached escape velocity.
– Christopher Own