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Do you want to be rich, or just richer? Understanding wealth building

When it comes to money, where do you see yourself? An aspiring millionaire, looking for the next pay grade at work, or just seeking comfortable living? It’s important to understand wealth building.
luxury yacht and house | Wealthify
Reading time: 4 mins

Understanding wealth is tricky, as it can mean different things to different people. For one person, being wealthy could be talking about having millions in the bank, for another, it could be a good nest egg, and for others, it may be some breathing room in between paychecks.

The important thing to understand is that, regardless of what your aspirations are, building wealth is important.

What is wealth building?

Wealth building and saving money are essentially the same thing. The difference with wealth building is that it looks to create an income of its own over the long term. Depending on your situation, proper wealth building relies on financial planning and advice. But this isn’t always necessary, for example, Wealthify works to make it easy for anyone to build their wealth.

That’s right, building your wealth could be as simple as investing. You see, when you invest you’re not tying your money to a single rate of interest, instead, you can take advantage of changing prices of shares, government or corporate bonds, property, commodities, the list goes on! This means that your money has much greater potential to grow and even earn an income in the long term

How do you build wealth?

If you were looking at wealth building with a simplistic approach, there are three steps to it:

  1. Make money
  2. Save money
  3. Invest money

Of course, it’s never that easy, is it? But this is fundamentally all there is to it. However, we’ll take a deeper look into what’s involved to give you a better idea of how to build your wealth.

Step one: make money

Unless you were born into enough money so that you never have to work (lucky you!), you’ll need to find a way of making money to get by in the world. This could be a regular income like a salaried job or more sporadic income from selling artwork. Provided that you have a way of making money, you’re well on your way to being able to build up wealth.

Step two: save money

If you have an income that allows for financial stability, then it could be a good idea to start saving your money. Not only is it wise to have some emergency savings tucked away for if times are hard, but saving is a great way of building up money to help meet your short-term goals. For many people, saving can be one of the hardest steps towards building up wealth, and getting started is one of the hardest points.

Having a monthly budget could be a good way to start your savings journey. If you tuck away a little bit of cash each month, then these small sums could turn into something quite impressive. For example, putting away £100 a month is £1,200 every year – so after five years, you could have saved a whopping £6,000! That’s not bad at all.

Step three: invest money

While making the lifestyle changes to start saving may be tricky for some, surprisingly few people have traditionally gone through into the third step of building wealth. Part of the reason for this may have been the complexity that surrounded investing, with lots of jargon and terminology making investing inaccessible. The other reason could be that people don’t know how to start investing their savings or they may be put off by the cost, either people believing that investing was too expensive for them or wanting to invest heavily in stocks they couldn’t afford.

Wealthify was designed to help more people build their wealth through investing. We’ve made the process so easy that you could invest with as little as £1 if you wanted to. Of course, you won’t become a millionaire overnight, but you are taking a step in the right direction.

But why is investing the final step? Well, let’s take that £100 a month from earlier. Say you’d built up a nice emergency savings pot and now you wanted to give your money even more potential. Putting that £100 a month into an Investment ISA instead could give you £6,441 after five years.[1] That’s £441 more than you’d have gotten if you just put that money away without earning interest. But if you kept this saving up for ten years, you’d have invested £12,000 – but your returns could be £14,074[2]. That’s over £2,000 more!

What’s more, the longer you invest for, the bigger this gap could be and that’s thanks to a little thing called compounding. Compounding is what happens when you reinvest your profits so that that money can make profits of its own. The longer you do this, the more potential profits you’ll have and so the more money it could make.

Ready to take the next step in building your wealth, why not give Wealthify a try? Our simple to understand investment service does all the hard work for you, just choose how much you want to invest, pick an investment style and our experts will do the rest. We’ll build and manage an investment Plan for you, and you can check your performance day or night through your online dashboard or using our app.

Your tax treatment will depend on your individual circumstances and it may be subject to change in the future.

With investing, your capital is at risk, so the value of your investments can go down as well as up, which means you could get back less than you initially invested.

  1. This is the projected value for a Confident Plan (Medium Risk Plan) with an Original theme. This is only a forecast and is not a reliable indicator of future performance. If markets perform worse, your return could be £5,702. If markets perform better, your return could be £7,251. Values correct as of 17/01/2023
  2. This is the projected value for a Confident Plan (Medium Risk Plan) with an Original theme. This is only a forecast and is not a reliable indicator of future performance. If markets perform worse, your return could be £11,734. If markets perform better, your return could be £16,825. Values correct as of 17/01/2023
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