You could, for example, create a side business selling a skill you currently have (accounting, legal, writing, editing, purchasing, etc.) or could develop (graphic design, copywriting, resume writing, etc.). Or you could turn a hobby or passion (stamp collecting, gardening, pets) into a profitable, Internetbased direct-marketing business.

As your side business grows, it will require that you reinvest some of the profits into creating new products, hiring employees, and developing new advertising campaigns. You should allow for growth, but limit it to avoid growing so fast that you end up losing control and getting into trouble.

Equity-building real estate. Buying equity-building real estate means buying rental properties. The trick to making this work for you at this second stage of wealth is to buy conservatively— that is, to make sure that the rent you’ll get will at least meet (but should really exceed) your cost of maintaining the property. I recommend duplexes, triplexes, and quadruplexes to start. They’ll give you the best chance to achieve zero or positive monthly cash flow. How much equity-building real estate should you develop? If you have a net worth of $100,000, I’d recommend a little more than half. Let’s say $60,000.

Fixed-income instruments. The rest of your money should be in Treasuries, municipal bonds, or quality corporate paper. Fixedincome instruments like these don’t provide a high return, but they are safe.

When you get to the next stage—that is, when you have between $25,000 and $100,000 to invest—you can take a multilayered approach to your investing. I like the following simple five-part formula.

1. Cash. The first money you save should be marked for emergencies. This needs to be put someplace that is secure but easy to access, such as a home safe or a safe-deposit box. The amount you should keep for emergencies depends on your personal situation: how much you typically spend, how reliable your income is, and so on. As a rule of thumb, though, I’d recommend about 10 percent of your investable net worth. If you have $100,000, that would be $10,000.

2. Income-generating real estate. I recommend buying and flipping real estate for everyone, even beginners. If you start when you have less than $25,000 to invest and make a few deals, by the time your investable net worth hits $100,000, you should have a pretty active, nicely profitable second stream of income.

3. Side business(es). If you didn’t want to get involved in a side business when you had less than $25,000 to invest, you should consider it at this stage. You don’t have to risk a ton of money. Invest $10,000 conservatively in a business you understand and see where that takes you.

You can invest a small amount of money (and a lot of hard work and well-spent time) in a small business and see it grow into a business that is worth a million in seven years. I’ve done it many times. I’ve coached people who have done it. Stories are published in magazines every month about people who have done it.

But let’s be frank. With only $18,000 to $25,000 to invest, it won’t be easy. That’s why I like to encourage Early to Rise readers who are at this first wealth-building stage to focus most of their time and efforts on building their income. Doubling your income in a year or two is entirely possible if you follow the advice I gave you in previous posts. And if you double your income and don’t double your lifestyle, you’ll have a lot more money left over to ensure the success of your small side business.

Here are five things I recommend if you are in this situation:

1. Find a way to radically increase your salary by making yourself radically more valuable at work.
2. Resist the temptation to spend more money as your income rises.
3. Put some of your savings down on an undervalued, small, single-family house, fix it up fast, and sell it for a profit.
4. Reinvest that original capital plus the profit in another buyand-flip deal. Keep doing this until it becomes a very pleasant habit.
5. Invest another portion of your savings in a part-time, weekend business. Sell a product or service you know and understand.

Make sure you are not a pioneer. Unless there are others actively selling the same thing, you don’t want to be in the market. The idea is to enter an active market with a better/cleverer/cheaper version of what others are selling. Sell only by direct response—print, mail, and Internet. Go carefully and learn from your mistakes.

I’ve mentored several friends and relatives in starting up small businesses. The first years were always a struggle, because they were trying to find ways to efficiently bring in new customers. Once a way was found, things got much easier. Developing a back end (i.e., selling other, usually more-expensive products to existing customers) is relatively easy, as is refining operations.

A typical business start-up of this kind will break even or lose a little money in year one, make a decent salary for the owner in year two, and provide a substantial bonus—in addition to a good, arm’s-length management salary—in year three. After that, it’s usually straight uphill.

If your scope is seven years or less, there is only one answer: Start a business. You can’t start a capital-intensive business with $18,000. You can’t, for example, open a restaurant or create a new line of pharmaceuticals. But you don’t want to be in those businesses anyway. (The risk/reward ratio isn’t working for you.) Much better to start a business selling something you know about—such as gardening or collecting beer steins or taking care of pets. You can start a little business like this for a few thousand dollars if you start small and go slowly—at first.

It’s true. And you will probably never hear this from any other wealth-building “expert.” Unless you have more than $25,000 to invest, you probably shouldn’t be investing in individual stocks—and you definitely shouldn’t be trading options and futures.

The reason is simple: You want to get wealthy in 7 to 15 years— preferably in less than 7. There is no way that $25,000 can turn into something that even sounds like wealth in that amount of time— hough there are a lot of professional investment gurus who will tell you otherwise. In fact, there is a huge, multi-billion-dollar business that is determined to snow you on this issue.