What is Wealth Potential?
What is wealth potential? Wealth potential is the ability of someone to make a certain amount of money in one specific time frame. Everyone has their own unique goals that are based upon their needs, wants, dreams, and desires. As an example, your goals might be to have enough money to go on vacation twice a year or have enough saved up for retirement. Or maybe you want both! It doesn’t matter what you’re looking to do with your wealth potential as long as you have a certified financial planner on your side helping you with your financial decisions.
Types of Wealth Potential
Time Wealth
It’s the easiest and simplest kind of wealth there is. You simply set a goal to accumulate so much time by a certain date, then you work until that date comes. I’m sure many readers have heard of the story of The Millionaire Next Door, which highlights examples from people who managed to accumulate vast sums of money “on their way to work” in much less than 40 years (e.g., Bill Gates). This is also known as Financial Independence or FI/RE. There’s a common joke among financial analysts: “If you play stocks long enough, you’ll become poor.”
Growth Wealth
This sort of wealth occurs when you commit yourself to compound your mass, possessions, or income at a rate above the rate of inflation. For example, if you have a net worth of $1 million and can grow it at 10% annually, you’ll have more than $17 million in 10 years. While this may be difficult to achieve, it’s still possible with the right mindset and approach.
Asset-Based Wealth
This is the most common type of wealth and is what most people think about when they hear the term “wealthy.” It’s simply having a large number of assets that generate a steady flow of income. This could be through property rentals, dividends from stocks and shares, or interest payments from bonds. The key to amassing this type of wealth is buying assets early and at a good price.
Bottom-line
Wealth potential comes in many shapes and sizes. Some may want a certain amount of money by a particular date, some might want to generate a certain rate of return on their assets above the inflation rate, and yet some might want both! Whatever you want your wealth potential to be, make sure it’s what you desire.