Many people fall under the mistaken belief that income equates to wealth. In actuality, the person making a few thousand dollars every month on passive income is in a much better position to create wealth than the physician from New York making over one hundred thousand. At least in this position, the person generating passive income has his/her money working for them and the availability to acquire other sources of wealth.

Savings should not be mistaken as a source of wealth either. Wealth pays for itself.

So what are the keys to generating wealth?

As most financial professionals will tell you, it’s all about mindset. You need to think rich to be rich.

As Steven Richards said, ““You are essentially who you create yourself to be and all that occurs in your life is the result of your own making.”

Contrary to what most believe, wealthy people do not drive around in new Porsches or own million dollar mansions. According to Thomas J. Stanley, the average American millionaire never spends more than $399 on a suit for him/herself or others.

To become wealthy, you need to spend your money like a wealthy person:
Avoid junk spending
Drive cheap cars and rent cheap apartments
Save money on utilities/
Avoid debt with no return

But these strategies are merely a start to controlling your finances. With a little nest egg saved up and a tight income, how are we supposed to start generating wealth?

Start Paying Off Principle Debts

One study found that among college educated millennials, 81% had at least one source of long term debt. This has forced many young people to seek debt recovery by working extra jobs, longer hours, or taking employment outside of their field. Investors, on the other hand, often don’t even work a forty hour work week.

Taxes and interest are the biggest leeches of wealth out there.

It’s key to prioritize and pay off high interest debt as fast as possible. Use your income tax returns or a larger portion of your income checks to start paying off debt as soon as possible. While this will impact savings in the short term, you’ll find that you’ll save so much more money in the long-run.

Invest in Education (Self-Education)

Where do you think the rich learned to get rich? Was it from a business class taken at their local university? Were they born with the sight to spot investment opportunities from a mile away?

To be rich you need to take an idiosyncratic path that verges about a hundred miles west off the beaten path. But you need to know where you’re going and there’s no greater tool to guide you there than a good book.

If you want to get rich, you need to know the lingo and the literature. One of the biggest reasons that many people avoid investments or hand them off to a financial manager is that they’re too complicated.

Know where to to invest your money and how to handle it. You may think that Tony Robbins’ advice is a fraud, but his wealth and success certainly are not. Ask any major CEO and they’ll tell you that the key to getting rich is knowing how to get rich. This starts with having the right mindset and the right education. There are plenty of resources out there to start.

Let Your Money Do All the Work

This leads me to my final tip, which is taking what little you do have and making small investments. The key to acquiring wealth is not earning money, but owning more. This involves two strategie, apportioning money to multiple stream of revenue and investing any capital gains back into assets.

While it’s important to have a rainy day fund, savings over a long-term has no way of keeping up with inflation and delivering much of an ROI. For retirement funds and savings accounts, IRAs, especially the Roth, are a great way to generate low end yields over a long, fixed period.

For entrepreneurs and business owners, there’s also a greater ROI from investing in your company than yourself. Avoid personal spending and savings and invest that money into a financial instrument that will actually make you money. In turn, you’ll discover that the key to wealth is not active income, but acquiring money (assets) that pays dividends on itself.

Author's Bio: 

Lena loves to write.