Cash. Having a financial cushion of cash reserves provides security and stability. It ensures your essential expenses are covered in case of emergencies. Building up your cash reserves is the foundation for wealth.
Collateral. Collateral refers to assets that can be pledged as security for a loan. Assets like real estate, investments, valuables, and business equity can serve as collateral. Maintaining valuable collateral provides access to capital and opportunities.
Capacity. Your income-generating capacity determines how much money you can accumulate over time. Increasing your income through earning potential, skills development, and career growth expands your capacity for wealth building. Tax efficiency also improves your capacity.
Compound Growth. The sooner you start building wealth, the more time your assets have to grow through the power of compound interest and returns. Compounding returns are the engine that drives exponential growth of wealth. Save and invest automatically as early as possible to benefit from compound growth.
To accumulate wealth, you need a solid foundation of cash reserves, valuable assets you can collateralize, the ability to generate a high and growing income, and time for your wealth to compound substantially. Building wealth is a process that requires developing good financial habits and disciplines over the long run. While luck plays a role, the 4 C’s make wealth attainable through dedication and persistence.