Section I - Lesson 1
Financial Plan - How Wealth Is Accumulated
Many of us begin our adult lives with either some erroneous ideas about how wealth is accumulated, or with no idea at all . This is usually because we've had no one to educate us on this most important subject.
From our limited perspective we suspect that wealthy individuals have inherited money, or married into money, or obtained it through luck or through some financial masterstroke, which could include winning the lottery, getting into the "right" stock or business on the ground floor, or just being lucky enough to know the right people at the right time.
While any of these situations could surely jump-start your wealth building program, they are by no means typical of how most wealthy people get that way. As a matter or fact, coming into a lot money quickly, before learning how to manage it, can actually be hazardous to your wealth.
Until we've educated ourselves about the wealth accumulation process, simply finding more money seldom solves our problems. Many people, given more money, only get deeper in the hole. We've all heard of people who came into a windfall of some sort only to wind up right back where they started, or worse, because they never learned how to manage money in the first place.
In their best selling book, The Millionaire Next Door (Pocket Books: 1996), authors Thomas J. Stanley and William D. Danko develop a number of insights about how ordinary people become wealthy in America. Their research shows that it's seldom luck, or inheritance, or advanced degrees or even intelligence that enables people to build wealth. It is more often hard work, thorough planning, persistence, and most of all self-discipline that gets the job done. The implication of their findings is that nearly anybody with a steady job can amass a tidy fortune.
We agree! On the back cover of our book, Financial Independence 101, A Simple Strategy For Building Wealth, we state: "It's not the least bit difficult to prosper in America. We need only to get an education, get a decent job, and learn how to save and invest our money. Anyone can do it. You can do it too!"
In the lessons that follow, we'll look at how quickly wealth can grow, why you must have a plan, and what the basic elements of that plan need to be.
To summarize then, real wealth does not usually come about as the result of some single financial occurrence. For the vast majority of people, it comes about as the consequence of a long-term master plan of saving and investing small but regular amounts of money over long periods of time on a systematic and consistent basis. We'll develop this concept more fully in the lessons that follow.
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