Have you wondered how the rich gain their wealth? Well, if you’re like me, I’m sure you have. Yes, it’s true, some were born into a rich family and that how they got their money. They had the money given to them or were helped out with a loan to get started, not mentioning any names cough…cough…Donald Trump…cough. However, not all of us are so fortunate. Some of us don’t have much to work with, but this doesn’t mean that we can’t get rich. There are many fabulous examples of people that even started from nothing like Amancio Ortega founder of Zara and Ingvar Kamprad founder of IKEA. They both came from very poor families, even

Bill Gates and Warren Buffett, although not poor are self-made billionaires. The point is anyone with enough dedication and drive has the potential to have wealth. Many dream of winning the lottery and becoming rich overnight (odds are you won’t, one in tens of millions win) or looking for a quick way to get rich through different schemes (most likely it’s a scam, actually I guarantee it). Don’t get trapped by these scams, its pure gambling and you’ll never be rich that way. Generating wealth takes time and hard work, it won’t happen overnight.

Here are 5 ways that will help get you on your way to becoming wealthy:

Cut credit debt

Having credit card and loan (credit line) debt is the greatest enemy to wealth. Debt accumulates interest and creates a black hole that will suck you dry. Pay off any debt as soon as possible and avoid at all costs using credit cards.  Credit cards hold the most interest at around 20% per year and some higher. Get rid of them and only borrow what you need.

Live below your means

Some of the wealthiest people will dress like any average person, look at the late Steve Jobs or Mark Zuckerberg. You might wonder why? Some people with money understand the basis of need versus want. These people still live comfortably, but don’t overspend on things they don’t need. Sometimes it great to have nice things, but you can always put your money to better use.

Invest in the stock market

The stock market is a great way to generate wealth, but I’ am not talking about high risk day trading. I am talking about long term portfolio investment that can yield up to 10% or more growth per year (depending on risk factors). Portfolios feature a group of companies where the investment is divided between them.  In my option the best portfolios are the ones that give out dividends (portion of company profits issued to investors) know as dividend portfolios. Divident portfolios allow the investor to receive a profit quarterly (usually), so it’s like getting paid every four months for doing nothing.

The great part is that in Canada we have the option of opening a TFSA (tax free savings account, click for more info.) that allows you to invest without getting taxed on profits up to a certain limit. A great way to find out more is by talking to a financial adviser at your local preferred bank, they will advise on different portfolios. The great thing is they can manage your portfolio for you (for a percentage) or you can manage it yourself. Also, look into investing in start-up companies they can prove to be very profitable in the long run.

Wealth in real estate

Buying property, especially houses can be profitable and grow your wealth substantially. For example, in Canada interest rates on a mortgage average 3-4 % (depending on credit score and length) per year whereas (depending on area) home value rises 6-9.5% and in some cases more. This gives you a 3-5.5% value increase in net profit, on an average $250,000 home you’re looking at $7,500 to $13,750 profit. Of course, this is just in one year and without any changes to the house. In order to increase value some people do renovations which yield a return on renovation investment from 75-100%. However, this depends on a variety of factors and it’s not for everyone, if you don’t know what you’re doing you can even lose money.

A good way to maximize profit with real estate is to buy a house live in it and rent out the basement and other available rooms. This way you can cover utilities and the mortgage from the rent charged and be able to keep an eye on things. You will save money on your own rent since you don’t have to pay any and you’ll be basically getting a house for free. Finding the right people to rent to might be difficult at first, but once you find them it’s easy sailing from there on.

Specialize to generate wealth

Ever wonder why lawyers and doctors make so much money? It’s because they specialize in a certain field and practice it until they become great at it. If you specialize in something you will gain more money for your expertise. There are two ways to do this, either school or experience. School will provide you with the theory, while the experience will provide you with the hands on experience. I recommend finding something you’re good at or enjoy and stick with it. Do your best to perfect your techniques and learn all you can; read books, articles and watch videos. Knowledge is power the more you know the wealthier you will be. Eventually, you’ll become an expert giving you the opportunity to run your own business.  Running your own business will generate you the most amount of money.

Questions:

What has helped you generate wealth?

Why do you want to become rich?