Work Doesn’t Build Wealth

By Josefin Gatsby on 04/20/2024.
Reviewed by Michelle Clardie .
I’m a big fan of hard work. A strong work ethic is the backbone of the American economy. Without it, the whole system falls apart. But work doesn’t build wealth. 

Very few people will ever get wealthy from their income. For starters, there are only so many hours in the day. So your income potential is limited by how many hours you can commit to work and how much you can accomplish in those hours. 

Secondly, most jobs just don’t pay enough to create wealth. Even an attorney making $100 an hour with a standard workweek only earns $208,000 per year. It’s a lot, sure. But once the taxes are taken, bills are paid (including those expensive student loan payments), and reasonable needs are met, there’s not a ton left.

So what does it take to build wealth?

The secret to building wealth and achieving financial freedom is to make your money do the work.     

How to Make Your Money Work

When you put your money to work, it can work round the clock, generating wealth while you’re sleeping, handling projects around the house, or working your day job. 

The way you make your money work is by using it to buy or create assets that will appreciate over time and/or generate passive income

Here are a few examples of making your money work for you:

  • Use your income to purchase or build a business. Many business models are fairly passive. For example, automatic car washes, laundromats, and vending machines can bring in fairly good money without requiring much time. If you’re interested in a business model that requires more active management, you can hire a manager to oversee operations so that you don’t have to invest too much of your own time in the venture.

  • Invest your income in rental properties. Rental properties come with several financial benefits, including passive rental income, long-term appreciation, and tax breaks. Turn-key properties typically require very little active management once the renters have moved in, but the upfront financial investment is substantial.

  • Invest your income in a real estate syndication project. If you want the benefits of investing in real estate, but you don’t have the funds to purchase a property on your own, syndication may be a good fit for you. Similar to crowdfunding, syndication pools funds from multiple investors to finance a single, professionally managed project. It could be a quick fix-and-flip, a multi-family development, or a long-term rental. And, because the deal is professionally managed, there is no industry experience or knowledge needed.

What Happens When Your Money Works for You?

Let’s crunch some numbers to compare building wealth with income vs. building wealth with investments. 

Let’s assume you make $100,000 per year. And you budget your money so you can save $12,000 per year. 

If you consistently save $12,000 of your income every year for 10 years, you’ll have $120,000 at the end of year 10. Keep this up for 20 years, and you will have $250,000. That’s not bad. But it’s also not wealth.

Now, what if you take the $12,000 saved at the end of Year 1 and invest it in real estate syndication projects earning 15% per year? (By the way, 15% per year is realistic, given that the average annualized return for syndication from Gatsby Investment is currently 23%.)

At the end of Year 2, you would have your original $12,000 plus the 15% return ($1,800) plus the $12,000 accumulated over Year 2. That gives you a total of $25,800.

At the end of Year 3, you would have your total from Year 2 ($25,800) plus 15% on that ($3,870) plus the $12,000 accumulated over Year 3. That gives you $41,670.

The pattern repeats each year, and by the end of Year 10, you have $243,645! Now, keep this up for 20 years, and you end up with $1,229,323!   

This magic wealth-building strategy takes advantage of compounding interest. It allows you to grow your wealth exponentially by reinvesting your investment earnings until you have a large enough portfolio that you can literally live off the returns. That’s wealth. 

Start Building Wealth Today

Your income will never make you wealthy. But when you put your money to work, you can build wealth that can bring you financial independence and even provide for future generations

The longer you wait, the less time your dollars have to work their magic, so put them to work today. Start building your business, buying your rental properties, or choosing your real estate syndication projects now.

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