Medical professionals think there is a magic formula or there is a special thing that you need to do to become wealthy.

As far as I know, there isn’t one. I do, however, know a formula that is tried and tested and works.

In Australia, there’s a huge gap between the wealth levels of the richest households and the average Aussie. And the news for Medical Professionals is good because they earn significantly more than the average earner. The problem is that earnings do not equal wealth or how rich you are.

This is what a recent Canstar data shows. It says Australia’s rich have more than 66% more wealth than the average person.

It gets worse because it says that they also have more than 172% more wealth than those in the lowest 20% of the population.

To me, that is quite sad. Many of you do not know this, but I come from a very poor working family background. Buying a pair of school shoes required a family meeting. I remember my clothes being kept in an old pillowcase. So, having moved from that to a more comfortable lifestyle is not something I am just grateful for but one that everybody should be able to have as an opportunity.

But is it worth asking what the rich are doing that not only makes them rich but keeps them there, too?
Well, for the last 25 years, I have spoken to people on both sides. And this is what I have found.

Most think rich people make all their money from complex investing and tax avoidance or tax reduction strategies. To a certain degree, that may be true. If you have spare cash lying around, you can invest it. Equally, spare cash means you can afford to pay for advice that lowers your taxes.

But that’s too simple and not all true. In fact, I often say that if you concentrate on low taxes, that is what you get. And low taxes can mean lower income when you really want high income. I always say concentrate on generating the most income or profits. Then, work out how to pay the least amount in taxes on that income. Because that way, you may still end up paying taxes but ultimately have more money in your pocket, some of which you can invest.

I have found that wealthy people follow a recognised strategy to build wealth. Set up a solid foundation of investing and build from there.

Wealth builds in stages.

If you want to build true wealth, you need to set your foundations first. And in the beginning, it does not look like much.

Think of a house. The main part is actually the foundation. When it is laid, you don’t see a house. All you see is a concrete slab. But in most cases, that is 50% of the entire process of building a house. Investing and creating wealth is exactly like that.

Consider this example.

If you were to invest $200 per week in the Australian stock market (which has historical returns of 9.8%), this money would grow to be worth around $5.15 million in 40 years.

Ok, I get it. If you start at 20, add another 40 years, and at age 60, you get $5.15 million. The problem is there are not many 20-year-olds who can put away $200 a week. Maybe at age 30. But if you start at 30, you are aged 70 by the time you get your money, which is when you are in adult nappies. It’s not really much fun or a time to have adventures.

So, people tend to start later and try to catch up. The problem?

Well, let’s say you start later and invest for half the time (20 years) but invest by doubling the amount. The same amount is invested. The result? Drum roll, please…….

Well, you end up with ‘only’ $1.28 million.

But that is $3.87 million less money from saving and investing the same amount of money. What if you start later but want the same amount of money? Well, in our case, you would need to put away a whopping $1,595 a week to end up with $5.15M over 20 years.

Wealthy people use time to their advantage, and they know this, so make sure their children start at an earlier age. It is one of the reasons I started investing for my own children when they were 11 and 13. I hope they thank me for it. Something tells me the scumbags probably won’t.

Anyway, the wealthy start sooner and then invest consistently, letting the power of time and money work for them. They make this happen by getting their financial foundation sorted early and then building from this foundation over time. And they usually do this by getting advice from professionals early on.

What is this ‘financial foundation’?

• Saving

The first stage is all about savings and day-to-day money management. I always say put away 20% of your income as soon as you receive it. Then spend the rest. I do not care about what. I am only interested in the 20%. If you cannot save 20%, then the conversation needs to be based around what your expenses are.

• Investing

Sometimes, people skip this step or don’t get around to it until their later years. I was one of those (only because I decided I wanted to be debt-free sooner rather than later), so don’t beat yourself up if you are also waiting.

The problem in Australia is that we have compulsory superannuation. Most people know they will have a pension pot, but they do not have much knowledge allowing their employer or super fund determine the results they get over time.

This is why investing independently of Super may be a good idea.

• Leverage

Leverage is using someone else’s money to make more money.

When you borrow and then invest, so long as you choose a good investment and have a solid plan, you’ll accelerate your progress far beyond what’s possible using your savings alone.

But always remember debt comes with some significant risks. The older you are, the less debt you want to take on.

The “secrets” of money success are simple. It may be simple, but not easy. And because it is not easy, we don’t want to do it, thinking we will worry about it when we need to.

But here’s the thing. I know many people who are in their late 40s or early 50s who fear what retirement means. Remember, we live longer now, so we need more retirement money to sustain us. When you are 40 or 50, thinking about investments may be a bit too late.

But that does not mean you cannot do it. You can. After all, I did not start proper investing until I was in my late 30s and early 40s. The key is knowing what you need and a plan to get there.

And one thing I will tell you for sure. Very rarely can you build wealth on your own. You need professionals and advisors who can help.

Investment and building wealth are steps 7 and 9 of our 9 steps to working less, earning more and building wealth. If you want more information, email Hitesh at hitesh@medisuccess.com.au or call 1800 281 038.