If you don't earn an above-average salary, you may think you'll never be able to build above-average wealth. Fortunately, this is not true. If you use your income wisely, you can become wealthy even on an average salary.
GOBankingRates spoke to private equity fund manager and real estate investor Grant Cardone to find out how.
Grant Cardone's wealth building formula
Cardone, who hosted the 10X Business Summit in Scottsdale, Arizona from January 12-14, 2024, shared a three-step formula for building wealth that applies to all levels of income earners.
“No. 1, invest in assets, not lifestyle,” he said. “Don't try to improve your quality of life: your car, where you live, your shoes, your belt, your wallet, your vacations. Invest your money in assets that will give you cash flow. [No. 2], use the cash flow from those investments only to improve your quality of life.and [No. 3], keep doing it until your passive income equals your earned income. ”
Essentially, you need to invest in assets that generate passive income and live on passive income rather than earned income. If you continue to use the income you earn to invest in income-producing assets, your wealth will continue to grow. Cardone believes this is a much more fruitful strategy than focusing on increasing income.
“The problem is that people want to make more money. [so they] Get a second job. “A side hustle is not the right thing to do,” he said. “The smart thing is not to add time, but to invest the money you already have. If you are a journalist and by day you sell soap on the Internet or build websites, You just work 12, 15 hours a day. That doesn't mean you're working. You're going to make more money. Now you have two active flows, but no passive flows.”
Best assets to build wealth
For Cardone's formula to work, you need to find the right assets to invest in that provide passive income.
“Real estate is perfect for that,” Cardone says. “Real estate is perfect because in contrast to AT&T stock, real estate distributes cash flow every month.” [that] It only generates cash flow quarterly. ”
Investment in income real estate teeth It's possible for an average salary earner, but it takes discipline.
“Say I work for a company and make $60,000 a year, and I get a $5,000 bonus for Christmas. Don't use that $5,000 to improve your quality of life or buy presents,” Cardone said. Ta. “Invest your Christmas money in a 4-unit property worth $100,000.” [rental property] That way, you'll be paid $2,000 a month next year. ”
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