What Is Wealth? And How Do You Build Wealth?

Contrary to popular belief, you don’t need an Ivy League education or a six-figure salary to build wealth. The facts don’t lie: Ramsey Solutions’ National Study of Millionaires found that engineers, accountants and teachers make up the top three professions of millionaires.

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Surprised? After all, those careers sound like the kind of ordinary, hardworking people you see every day—maybe you’re even one of them! And that’s exactly the point: With a little hard work, focus and financial discipline over time, anyone can grow their money and become a millionaire in America today. A large income can get you there faster, but it’s not the key.

Wealth isn’t built with luck or chance—most millionaires got where they are by making steady, disciplined choices with their money that allowed them to save and invest (instead of giving all they earn to the banks!).

So, what is wealth really? And what does it mean to be wealthy? Let’s take a deeper look.

What Is Wealth, Exactly?

The simplest way to measure wealth is to find out your net worth, which is simply what you own (your assets) minus what you owe (your liabilities). First, add up everything you have that’s worth money—cash in savings and checking, the equity in your home, 401(k)s and IRAs. Then subtract any debts you owe from that total. Ding! That’s your net worth.

If you don’t already, you can track your net worth over time (just do yourself a favor and don’t check it everyday—because building wealth is a marathon, not a sprint!) and celebrate the progress you make. When you set goals and hit major milestones, it’s easier to build the momentum you need to keep going. Tracking your net worth doesn’t just show where you are—it also shows how far you still need to go to hit your overall wealth-building goals.

What Does It Mean to Be Wealthy?

Just as true wealth goes beyond your net worth, being wealthy also goes much deeper than what you drive, where you vacation, or what brands you wear. If you’re really wealthy, that means you have options for how you live your life, you make an impact through giving, and you’re leaving a legacy.  

Being wealthy gives you freedom. 

Wealth provides the freedom to create the life you dream of living, not the life you have to live. When you’re not chained to your work schedule or trapped by living paycheck to paycheck, you can decide how to spend your most valuable resource: your time.

Wealth can open a new world for you to explore and influence. You’re more available to the people you love, the people who love you back. You’re able to spend time you never had before, whether you use it on hobbies or business ideas, because you’ve built a safety net to catch you if you fall.

Being wealthy allows you to be generous.

After you’ve taken care of your family’s basic needs, you can be outrageously generous—and giving is the most fun you’ll ever have with money! That’s because you’re blessed to be a blessing. When your cup is full, you can let it overflow for others. By working hard and building wealth, you’re giving yourself an opportunity to make a difference and help the people around you.

Being wealthy helps you leave a legacy.

Wealth allows you to make an impact that reaches beyond just you. If you grow your wealth, your legacy can have a ripple effect in your community—maybe even the whole world!

Legacy extends beyond generosity because it can outlive you, transforming the lives of people you may never meet. Remember, wealth doesn’t exist for its own sake—it’s meant to be put to work! That’s what the Bible calls good stewardship: growing what God has entrusted you with to bless others and bring Him honor. Proverbs 13:22 (NIV) says, “A good person leaves an inheritance for their children’s children.”

How Can I Build Wealth?

The only way to become wealthy is to set goals to grow your money, then consistently do the hard work to make those goals a reality. In other words, “luck” has calluses on its hands and comes dressed in work boots and a hard hat.

So, are you ready to grow your money? These are the proven steps to follow:

1. Have a written plan (make a budget).

The first step is to make a budget each month. Why? Because if you don’t tell your money where to go, you’ll always wonder where it went. Nobody wins by accident. If you want to build wealth by growing your money, you’ll have to be intentional and manage it well. And the best way to do that is to live on a budget.

You can make your own budget in five easy steps:

• List your income.
• List your expenses.
• Subtract your expenses from your income (the difference should equal zero).
• Track your expenses (all month long).
• Make a new budget before the next month begins.

Need help getting started? Check out EveryDollar. Our budgeting app does more than just help you track your spending and manage your money—it actually helps you find more margin every month!

2. Get out of debt.

Your number one wealth-building tool is your income, so nothing steals your power to build wealth more than debt. Sending monthly payments to banks and lenders every month only helps them, not you. Trying to build wealth while you’re buried in debt is like trying to run a marathon with your feet chained together—you’re not going to get very far.

That means debt is your enemy. If you want to think and act like a millionaire, you’ll avoid debt like the plague. Millionaires know that interest paid (on debt) is a penalty, and interest earned (through investments) is a reward. You can either send all your money to big banks by paying interest on your debts or you can kick all that debt to the curb and take your life back.

If you have consumer debt hanging around like an unwelcome house guest, kick it out for good with the debt snowball method. That means paying off your debts from smallest to largest, building momentum as you knock off each balance one at a time. You can do this!

3. Live on less than you make.

Like we’ve said already, there’s a myth out there that you must have a high-paying job to build wealth. But that’s just not true! In fact, our study on millionaires found that only 31% of them averaged $100,000 per year over the course of their careers and—get this—one-third of millionaires never made six figures in any single working year of their career.

So, how did so many Americans build so much wealth with modest incomes? They lived within their means. They were careful not to spend more than they brought in each month. The last thing you want to do is blow through your income (or worse, start borrowing money) trying to keep up with the Joneses or let lifestyle creep stop your progress.

If you’re struggling to figure out why you’re feeling stuck, take a close look at your budget and find ways to say no to stuff you don’t need:

• Subscriptions you don’t use
• Expensive brands that are no better than generic
• Disposable, single-use items
• Impulse buys
• Restaurant meals (including that expensive daily latte!)

The kind of people on a path to become millionaires are careful about their spending—even after their net worth reaches that milestone. A whopping 94% of the millionaires in our study said they live on less than they make. Why? Because they understand that the habits that helped them build their wealth are the ones that’ll help them keep it.

4. Save and invest.

It’s simple: You have to invest your money so it can outpace inflation through compound growth. Investing in the stock market might feel scary, intimidating, and complicated, but it doesn’t have to be.

Once you’re debt-free with a fully funded emergency fund in place, invest 15% of your gross income for retirement with tax-advantaged retirement accounts like a 401(k) or Roth IRA. If you’re not sure where to start, just remember: Match beats Roth beats traditional.

• If you have a company match through your workplace retirement plan, like a 401(k) or 403(b), start there. A company match is free money, so don’t leave that on the table.
• After that, open up a Roth IRA and max out your contributions there so you can take advantage of tax-free growth and withdrawals in retirement.
• Then, if you still haven’t hit 15%, go back and invest more in your workplace retirement plan.

Spread your investments in those accounts evenly across four types of growth stock mutual funds: growth and income, growth, aggressive growth, and international. That way, you’re lowering your investment risk by not putting all your eggs in one basket.

And don’t forget: You can diversify even more by investing in real estate too. It’s not for everyone, and it’s important to be in the right place financially before you dive in. But if you’re up for it, real estate can be an awesome investment as part of a balanced portfolio.

5. Be generous.

No matter where you are on your financial journey, it’s important to develop a habit of generosity. Why? Because you’re blessed to be a blessing.

We believe something amazing happens when you realize your money isn’t yours—that everything you have actually belongs to God. When you make peace with that idea, you can develop a generous heart. Then you can give with joy, gratitude and faith. And that’s a completely different way to live.

Listen, we’re not shy about our faith: As Christians, we believe tithing—or giving a portion (10%) of our income to our local church—is one way we can demonstrate our trust in God. God is a giver, and when we’re generous, we reflect that part of His character. Besides, generosity is the most fun you’ll ever have with money—and it starts with tithing.

But you don’t have to stop there! Beyond your tithe, look for opportunities to give money to a charity you support or a friend or neighbor in need. You can also be generous with your time and skills by volunteering in your community. Whatever it looks like for you, start making generosity a normal part of your life—you’ll never regret it.

Get Help From the Pros

Successfully building wealth is ultimately a mindset, not a numbers game. If you’re willing to dig deep and apply what you learn, you can set and hit your goals. For help creating an overall financial plan, we recommend working with an investment professional like one of the pros in our SmartVestor program. You don’t have to go it alone!

This article provides general guidelines about investing topics. Your situation may be unique. To discuss a plan for your situation, connect with a SmartVestor Pro. Ramsey Solutions is a paid, non-client promoter of participating Pros.