Building Wealth
“Never depend on a single income. Make investments to create a second source.”
Growing up, my mother would often tell me, “Son, if you work hard, you can be anything you want to be in America.” I’m sure I am not the only kid who used to hear this from his parents. Especially coming from an immigrant family who was thankful that they had a bunch of opportunities that were not available to them back in Armenia.
From my parents' teachings, I wholeheartedly embraced and internalized many valuable lessons. I worked hard at whatever job I was at and was always looking at these opportunities as a way to learn and grow. But as a young adult, I started paying close attention to those that had “made it” in life and were successful. And they were saying something a bit different. “Work smarter, not harder.”
The interpretation of this quote allows for various perspectives. In the realm of financial wealth acquisition, I realized that working yourself to the bone was not the key to success. Moreover, it became apparent that such a lifestyle was far from desirable.
Undoubtedly, I hold great admiration for individuals who demonstrate a strong work ethic. Hard work serves as an essential foundation for success in every facet of life. It entails unwavering dedication, persistence, and the willingness to invest the necessary effort to achieve one's aspirations. Through countless examples, I am continually reminded of the pivotal role that hard work plays in shaping both our personal lives and society as a whole.
We recently observed Labor Day, an annual holiday in the US, which is a day of immense significance that honors the invaluable contributions of working people and the labor movement. It serves as a poignant reminder of the fundamental importance of workers' rights and pays tribute to those who have fought tirelessly for improved working conditions and fair wages.
While the concept of "wealth" is subjective and can have different meanings for individuals, the path to achieving it can vary significantly. For some, true wealth lies in personal growth and fostering meaningful relationships. However, when considering wealth in terms of financial freedom, becoming an owner or investor significantly increases one's chances of achieving it compared to being solely a worker.
My good friend Callie Cox recently shared a chart that shows the growth in wages vs. stock prices over every economic expansion since 1970. As you can see in the chart below, in almost every economic cycle since the 70s, the S&P 500 has outpaced that of wage growth. Meaning, the stock market performed better than the average raise of a person’s income. (if this isn’t a great way to beat inflation, I don’t know what is…)
Source: Callie Cox
As Callie points out, “...this chart is both inspiring and depressing, because it also tells the story of a widening wealth gap.” Over the years, I have personally witnessed the middle class start to disappear.
Now I’m not telling you to quit your job and start a business (even though the wealthiest people in the world did start a successful business) or start trading stocks full time. But what I am telling you is that while you work hard at your current job, you need to make sure that you are putting aside a decent amount of money in an investment vehicle where you can be an owner in corporate America.
Lucky for you, it’s easier than ever to own a piece of a successful business like Apple, Microsoft, Amazon, NVIDIA and Google. Whether you buy a low cost index fund or a diversified ETF (Exchange Traded Fund), just get started.
Action Items
True financial wealth extends beyond the mere accumulation of monetary assets; it encapsulates the liberation and stability derived from securing financial independence. Instead of merely working as an employee, the route to financial freedom lies in embracing the spirit of entrepreneurship. By becoming an owner of a company or investing in stocks, individuals proactively engage in the creation of value.
This transformative shift empowers you to take control of your economic destiny, rather than relying solely on external sources of income. Financial independence grants you the flexibility to pursue personal and professional aspirations without the constraints imposed by traditional employment. It allows you to allocate your time and energy in ways that align with your values and passions, fostering a sense of fulfillment and purpose.
Moreover, the security provided by financial freedom will enable you to navigate unexpected events, such as economic downturns or personal emergencies, with greater resilience and peace of mind.
True financial wealth represents a fundamental shift in mindset, from being a passive recipient of income to an active creator of value. It empowers individuals to harness their potential, seize opportunities, and shape their financial future in a way that aligns with their long-term goals and aspirations.
Here’s to building true financial wealth! 🥂
~Alex
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