How to Start Building Wealth From Scratch
By: Christian Soschner
Tags: Making Money Secret, Life Lessons, Budgeting Tips, Building Wealth, Success

How to Start Building Wealth From Scratch

5 Tips From My 20-Years-Old Self

Are you interested in getting out of your poverty misery? And want to become ultra-rich?

You already read books like Rich Dad, Poor Dad, or The Millionaire Booklet, and you still have no clue where to start?

Instead, you continue blaming your situation on the rich?

Well, then here are some ideas from my 20-year-old me back from the 90s. I may add some thoughts from the 2020s technology perspective.

So how did my 20-year-old self work himself out of poverty?

Accepting your starting position

The first necessary thing is:

Stop blaming other people for your situation

From my own experience, I know how inviting it is to throw everything away when you see a son of a lawyer's family driving with a Porsche to the University, looking down on you and telling you that people like you shouldn’t be allowed to study. It is a waste of resources.

Just do not fall prey to the Drama dynamic of such a situation. It is neither your fault nor his fault where you started.

And believe me — every life has it’s own challenges.

So if you want to change your situation, start with accepting your personal starting line and define your challenge, that you want to work out of poverty.

Just stop comparing your situation with other people’s life.

Get an income

Yes, I got a masters’ degree from the University of Graz. I had to finance it myself—no rich parents paid for food, shelter, holidays, and a university degree.

I got a lot of hate instead. Once I made some money with a nice hard working job-more to the job later. From the money I made, I bought a nice black suit. It was the only suit I could afford while studying.

So at every event, I wore the same suit. My “friends” were laughing at me. Why am I just wearing the same suit? Because I didn’t have money. And I learned to ignore such comments.

The thing was, I had dreams, and I didn’t want to give up on them. So instead of living on welfare, I was looking for jobs.

Back in the 90s, there were no part-time jobs for students. People were either studying at a University or working. And there was no internet. Well, at least not in the nowadays version. The main purpose of the internet was mainly writing emails just for fun. Or ordering a book from Amazon.

As the combination of a full-time job and studying was almost impossible. Well, it was impossible; I picked up every occasional job I could get.

What I did:

Security at concerts and events like formula 1. One of the better jobs

Bouncer

Assembly line night shift

Loading train wagons with goods in summer — manually

Installing computers for acquaintances

None of these jobs was fun. Well, except security at Formula 1 in the paddock area. That one was pretty cool.

But all the others were jobs. I very often got humiliated, but it made me money to follow my dreams.

I always focused on the goal university degree, which I believed to be the way out of poverty back then.

How you can apply it:

sit down, look on job portals on the internet

Look for any job with no education required

And apply for it

You got two strong hands, so use them.

Creating a budget

Once you have accepted your situation and created your first stream of income, you need to develop a plan and strategy for using your money.

I always thought of my income as a pie.

A pie on a plate that gets refilled every month. By the salary.

The question I asked myself:

How do I want to split the pie amongst my good friends who come by every month? Who were these friends?

My apartment

Grocery shopping

Clothes

Martial Arts

University

Computer Games

Holidays

Basically, everything I wanted in my life got a label assigned. As there were so many things I wanted, I put them into categories and allocated a percentage of the pie to each of them.

So here is my formula in a recap

50% of the pie went into necessities like rent, clothes, food. Everything that Maslow describes as basic needs.

20% Education: Yes, this is one of the most important things to me. It covers tuition fees, books, and everything need to learn new things

20% Saving and investment: Paying yourself first, say some. I say save and invest

10% Anything else: Procrastination, holidays partying

How you can apply it to your life:

Write down what is important to you

Put it into three to five groups

Split 30% between these 3–5 groups

50% always go-to necessities. It would help if you stayed alive and well feed. It is your priority

20% always go into saving and investing

Keeping Track

The first three points were pretty obvious. And relatively easy. Well, except for finding a job back then. eMails were not accepted. Every application was a printed letter and some phone calls. But this is something for another story.

So far, so good. You decided to start building wealth, created an income stream, and decided what to use the money for.

The tricky thing was putting things into action. Cash ruled the world in the 90s. In Austria, credit cards were something for the already rich.

Young people without money didn`t get credit cards.

So how could I keep track of the expenses?

Bank account to collect the income and deducted necessities.

The first thing was to create a bank account that holds the income stream. From this bank account, necessities are booked.

I started using my ATM card regularly to see where the money goes. The aim was to use as little physical cash as necessary.

Why?

Have you ever gotten 100 Euros from an ATM for a nice night out? And the next morning, you wonder where all the money went?

Keeping track of bills was a thing. Setting up an excel sheet, collecting the bills, and entering every transaction into the excel file. It was time-consuming work.

Keeping track is necessary if you want to keep your budgeting rules.

Deduct savings first thing in the month.

The only way to build wealth is by saving and investing. There is no other secret. I decided to go for 20% of my income. Every month the first thing I transferred from the paychecks was money to the savings account.

Every time I got a paycheck booked — I saved 20%. Even in times when I believed below the poverty line. 20% went to savings — always.

I know from experience that it is tough when you start from zero.

But it would be best if you started building this habit.

All the other expenses

Back in the days, it was hard work with excel and collecting bills. The excel had a column for

date

amount

brief description

category Food, Rent, Education, Saving, Fun

Every evening I sat down and analyzed how well I did in keeping the budget.

Some days were great, and sometimes I went astray. For example, spending more money while going out with friends because I had fun.

Anyhow, celebrate the days when you keep your goals. And don`t be too harsh when you fail one or the other day.

Nobody is perfect, and creating the habit takes time.

How you can apply it in your life in 2020

Create a bank account for your income streams. Bank accounts in 2020 are mostly for free anyway.

Deduct the fixed monthly payments like rent, water, electricity directly from this account

Create a savings account and transfer the percentage you want to save. I used the 20% most of the time in my life.

Create an additional bank account for the other categories you want to have

E.g., a bank accounts for shopping. Transfer the money you want to spend in a month directly to this account and use only this one for shopping

Do everything digital. It makes keeping track of your expenses much easier.

Debt doesn`t exist

One of the best advice I got from my mother and grandmother was:

When you can`t afford it, you can`t buy it.

It was a simple truth back in the 80s and 90s. If I hadn`t enough money on the savings account, I couldn`t buy clothes, a car, or whatever I wanted to have.

Do not go into debt

I am really grateful for this advice. It helped me a lot in life.

No matter what it is. Always save money for the purchase first. Dan Lok once said in a video.

The poor use debt to buy things. The rich build the asset first and use this to buy things.

No matter what it is that you want and what other people tell you. Do not use debt to buy things. Using debt will ruin your financial life. It is as easy as that.

How you can apply it in your life: