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The Simple Path To Building Wealth Thumbnail

The Simple Path To Building Wealth

The key to building wealth and establishing some version of financial independence is to change your mindset and actions away from being just a consumer of stuff and supplier of labor, and towards being an owner of capital and life on your terms.

The path is simple. Not easy, but simple. It’s all about committing to a process of acquiring appreciating assets. In other words, acquire assets that increase in value over time – stocks, real estate, the assets that work for you even when you’re not.

But we do the opposite. We overspend on depreciating assets. The stuff that loses value after purchase. Let that sink in for a second and look at your closet, look around at all your stuff. Now, think about how much money you spent to buy all of this stuff, and now think how much you could sell this “stuff” for today. I have a new client who estimates that over the last 10 years, she spent $100,000 on shoes. Shoes that she will likely be donating.

Now imagine, what if, instead, you used that money to buy “appreciating assets” – like stocks. The common excuses I hear: 1) the stock market is for rich people and 2) the stock market is way too risky and I don’t want to lose all my money. That thinking is 100% false. You can buy stocks for as little as $5 today with fractional shares. So, instead of just consuming the new Apple product, buy Apple stock and own a share of the company! Become an owner, not just a consumer. And don’t buy just one company, own many companies. You can own the 500 largest U.S. companies by buying an S&P 500 index fund with very little money.  

Small actions today add up over time.

Does the stock market come with risk? Yes! Historically speaking, the stock market experiences a negative return in 30% of calendar years. This also means that, historically speaking, the stock market experiences a positive return in 70% of calendar years. In contrast, depreciating assets experience a negative return in 100% of calendar years. When you think about it this way, how do you think about risk now?  

The simple path to wealth = intention + ownership. Intentionally add back the friction points between you and spending your money, and with your savings, consume appreciating assets. It’s that simple.