How Wealthy People Make Their Money

Everyone wants to be rich. Whenever you read about the world richest people and how much they make in a year, the first question you must ask yourself is how they make all that money. However, the answer is simple. The rich make their money from capital gains as opposed to get regular income. Since the rich heavily invest in their wealth creation stage, most of their income is from investments made earlier like stocks or property.

When it comes to regular income, less than 10 percent of the overall earnings of the rich came from good conservative wages. These percentages are a clear indication that the rich earn their money via passive income. But it should be noted that the rich did not just wake up one morning and become lucky. This is something they had planned for several years, 20, 30 or even 40. From the start, these people started putting their money into properties, into stocks, or perhaps even into businesses. Back then, they didn't use their money on boats and flashy cars. Instead, they put it into their future and that is why they are where they are today.

The Average Verses the Wealthy

There is a big difference between how the rich and the average people live. The reason why the rich and the average are where they are today is what their dream for the future was many years ago, 20 or 30, assuming that both graduated from college and landed a job paying $50,000 per year. An analysis of both of them will be as follows:

Average Person ?

1. Graduates from college with an education debt of $30,000.
2. Buys a new car for $20,000 after college as a way of congratulating himself following graduation.
3. Buys a house soon after he starts working because he is able to make payments. The house costs $200,000 with a payment of $1,200 for 30 years.
4. When he pays off his college debt, he makes a decision to continue making the payment, but this time it is towards a boat.

Millionaire Person ?

1. Graduates college with no debt.
2. Continues using his college ride until he has enough money to get a second hand one that is in good condition.
3. Buys a humble house for 80,000 dollars and pays off the mortgage in only four years.
4. When he is through with paying for his house, he keeps investing his payment amounts.

30 years down the line, the average person has finally paid off his home, meaning that his net worth gets to $200,000. This is his house's value since he always bought everything else on payments. While this might seem enough net worth to some people, it is not. Getting to your retirement age with this much money is not enough. 

Alternatively, the millionaire guy took a different path. He went through college with no debt, paid for his home in a short time frame and invested the rest or his earnings with vigor. His net worth is estimated at 2 million dollars. Finally, wealth creation depends on the path you take in the early days of your life. Investing is very crucial if you want to be wealthy. The wealthy are very consistent with investments, either in properties or stocks, and this is why they keep getting richer.

Mathew is a keen writer interested in wealth creation, finance, investments and property. He continues this interest in his work consulting on positive gearing property.