Wealth creation is the process of building up assets and resources for personal enrichment. Many nations encourage wealth creation among their citizens with the argument that it leads to a better quality of life and more individual autonomy. Citizens with personal wealth are less dependent on social resources and may in turn contribute resources to society through charitable works, job creation, and other activities. There are a number of approaches to wealth creation.
To build up assets, it is necessary to have something to start with. Wealth creation works best with a seed investment that will allow the individual investor to invest diversely and start accumulating funds for more investments. Some people may start businesses, begin trading in stocks, or purchase assets like real estate. For example, the investor might buy a home in need of some work at a low price, fix it up, and resell it at a higher price, pocketing the proceeds and paying off any outstanding debt on the loan if she used a mortgage for the purchase. Using her profits, she can repeat the process, gradually acquiring more valuable real estate and building personal wealth.
This can be a slow process, especially if an investor makes mistakes or starts with limited funds. Over time, wealth creation can become more complex as the investor starts to think about issues like taxation and managing investments for long-term returns. Diversification is a common aspect of wealth creation, as investors want to avoid situations where their investments are tied up in a single asset. The real estate investor above might also, for example, invest in a development company and place money in mutual funds or in the care of a brokerage for investments in stocks and other securities.
Work will provide income people can use for wealth creation, and it is possible to slowly build up wealth simply by depositing earnings into savings and keeping expenses well. This will not result in the accumulation of substantial wealth, however; it is necessary to make investments, sometimes risky ones, to build wealth. Financial advisers can provide assistance to clients who do not know how to invest safely and wisely, or want guidance to make sound investments.
One of the goals of wealth creation is to create an estate to leave to survivors so they will be comfortable. Entrepreneurial heirs may build the estate over multiple generations, creating a reserve of family wealth. This money is available to draw upon for a variety of investments as well as activities like charity.