How to Build Wealth from Nothing - Step 1

Understand HOW to Build Wealth


ALL IT TAKES IS THE FIRST STEP.  The toughest step, the longest step, that first step.  It’s easy to get caught in the pipe dream of “What would I do with $X?”, “If only I had $Y...”  The fact of the matter is, even if you are starting from nothing and the idea of acquiring even just $10,000 seems out of reach, IT IS POSSIBLE.   Whether it be a fitness goal, acquiring a new skill, or in this case, a financial goal, when looking at it from a realistic time horizon and making progress within that horizon, you can increase your net worth substantially from nothing in 10 years or less.  We’ve made this 8-step series to show you exactly what to do to increase your net worth through a little education, a couple of new habits, and a dose of grit.


Financial literacy and a game plan to increase net worth is only half of the equation.  Factors like income, career opportunities, and personal obligations are just a few examples of circumstances that will be primarily up to you to control.  For example, this 8-step plan does primarily assume that you have some type of income stream, whether that be from a full-time or part-time job, contract work, or even an allowance.  We will provide a framework and support system to help get you there, we just ask for your determination and willingness to make it happen.  The plan is simple, but not necessarily easy, as is the case with most things in life.  What we can assure you is that we’ll be here every step of the way to assist. 


Step 1 - Understand HOW to build wealth

The first step in building your wealth and net worth is to first understand where you need to go and what will help guide you to the destination.   The closest analogy here is driving to a destination you haven’t been to before.  First, you decide on a new destination you want to drive to (increase my net worth by $X in 10 years) and then you reference Google Maps, Waze, or even an old-fashioned map to guide you there.  Both the destination and the guide are made to work for one another.  If you just have a destination but no guide, good luck finding the destination.  Similarly, if you only have the map but no destination, you’ll just be wandering among the jungle of roads.  Now you might be asking, what about the car?  Quite frankly, it doesn’t matter.  A station wagon will get you to the same destination just as competently as a sports car.  Even walking long enough to the destination will still get you there and the time elapsed for doing so is all relative to where you are currently at in life.  Most importantly, the pace at which you are most content is the only pace that matters in the long run.


So what does this look like when it comes to building wealth?  As we go through this series, we’ll make sure to explain each topic and financial term as simply as possible.  Part of building wealth implies a basic understanding of financial topics, and outside of this series, we have many resources to clarify them even further.  Now back to building wealth. Perhaps one of the single most important aspects of building wealth is that IT TAKES TIME.  As much as we’d like to wave a magic wand and help increase your net worth overnight, it will simply never be the case.  Getting on the right track will take days, finding financial stability will take months, and building net worth substantially will take years.  As discouraging or out of reach as that may seem while reading this, you will see the progress along the way, and that can be the most motivating part of it all.  As with most things, the path is simple, but not always easy.  We have several Reddit communities to foster discussion and encouragement for those looking to increase their net worth and we are always a chat away so you are not alone.  

Creditworthiness  ≠ Financial Health


We talked about how you will see progress along the way, but what does that look like?  Is there a grading system for financial health?  How will you know if you are forming the right habits?  When it comes to managing our finances, you can track net worth quite easily and that shows how much progress you make over time which we will cover a bit later in detail.  But what about ensuring you’re optimizing your path to building wealth?  There is a common fallacy that the credit score is a good indicator of your financial health.  The truth is Creditworthiness  ≠ Financial Health.  You can have a high credit score but be in a terrible place financially as it was never designed to measure financial health.  The credit score is a measure used by lenders to assess the creditworthiness of an individual.  As Dave Ramsey explains, the credit score only shows how well you can borrow money and pay it back, that’s it.  Of course there are benefits to a high credit score because it allows you to get lower interest rates for constructive credit, but other than that, it is not a strong indicator of your success.  So what’s the alternative to measure your progress while increasing your net worth?  We recommend using the PRO Index™, the leading indicator of financial health designed to help you build wealth.  The PRO Index takes into account your entire financial picture to include income, cash flow analysis, liabilities and assets, as well as the credit score to give you a true north for your financial success.  Just take a look below to see the many differences between the credit score and PRO Index.  



Credit Score and PRO Index Comparison



At the end of the day, the credit score can help you get lower interest rates for loans you might need but that’s it.  By referencing the PRO Index on your net worth journey, you will be guided with the right incentives for wealth building.  You can learn more about the PRO Index here.


After you have oriented yourself with the PRO Index which will come in handy throughout your journey, the next thing you need to do (as with any goal) is to record your progress.  In this case, it is to calculate and track your net worth over time.  Net worth is simply the sum of all of your assets (everything you own) minus your liabilities (everything you owe).  So for example, let’s take a look at a customer whose net worth is $15,000:



As you can see, the sum of this individual’s assets amounts to $167,000 and the sum of their liabilities amounts to $152,000.  Plugging this into our net worth equation results in a total net worth of $15,000.

Don't Beat Yourself Up

    It is very possible (and not uncommon) to have more liabilities than assets in which case your net worth will be negative.  THAT’S OK!  Millions of Americans fit this profile and are working to break-even, after which they can focus on achieving a positive net worth.  Each person’s journey to increase their net worth is completely different and there is no better or worse place to be starting out as everyone will be on the same journey up!  If you have many liabilities it can be overwhelming but we’ll walk you through each one and cover common scenarios such as paying down debt versus saving money (hint: it’s typically better to pay down debt than save since the interest typically accrues faster on liabilities against you than it does on savings for you, but there are exceptions).  


    Now you may be wondering, how do I actually calculate my own net worth and keep track of it daily?  There are really only two ways.  The first way is to do it manually and keep track of all of your account balances on at least a month-to-month basis.  You can also use automated software that will calculate net worth for you on a daily basis so that you can track all of your accounts in one place and record progress over time.  Harvest Platform keeps track of your net worth and your PRO Index all in one place so you can see the correlation between the two over time.


In Step II of How to Build Wealth from Nothing, we’ll discuss how you can get an immediate boost to your pocketbook to help you get started on your path to higher net worth.

Harvest helps increase the net worth of the 99% through artificial intelligence and financial automation. To date, Harvest has refunded over $2M in bank fees and interest charges to its members with the ultimate goal of increasing the net worth of everyday Americans by $1 trillion by 2030. Our platform starts with providing immediate relief through bank fee and interest charge refunds, orients a member's financial health with our proprietary PRO Index, and keeps track of net worth over time aided by our suite of financial tools. Check out our 8-step guide on "How to Build Wealth from Nothing" to get started on increasing your net worth.