Steps to Wealth Building

Wealth building isn’t a difficult formula. We like to go by the K.I.S.S. principle: Keep It Simple, Stupid. We know these 4 steps will do the trick:

1. Save

2. Avoid Debt

3. Invest

4. Give

While there are definitely a lot of subcategories that can go under these 4 steps, we know they work for building wealth.

Step 1. Save

Saving is something that we all know we should do, but actually having a plan and carrying that plan out is another story.

The saving that you should start with is emergency saving. Plan as if something catastrophic is going to happen (you lose your job, get injured and can’t work for a couple of months, your roof starts leaking, etc.). We recommended starting with $500-$1,000 in an easily accessible place as soon as possible. This will act as a buffer between you and any emergency.  

Financial experts seem to all agree that you should save anywhere from 3-6 months of expenses long-term. We think that is a great start, although saving should go beyond that.

Saving enables you to have peace of mind and stability for the future.

Peace of mind is created knowing that if something were to happen, you would still be able to survive (and sometimes thrive) without steady income. According to this article on Bankrate.com, “More than one-third of households endured a major unexpected expense over the past year [. . .] with only 39 percent saying they would cover a $1,000 blow with savings.” Most people aren’t financially ready for emergencies when they come, and we all know that emergencies will happen sooner or later. The question is, will you be ready?

Step 2. Avoid Debt

Debt has become the new “norm”. Everywhere you look there are credit card ads, car commercials offering low interest rates and “special financing” on practically everything. Don’t fall for their tricks. Debt will seriously hinder your financial independence and can leave you in a dangerous situation.

If you are currently in debt, get out as soon as you can. There are plenty of effective ways to eliminate debt, but the best method is one that keeps you motivated and on track. Paying off all of your debts will lift a huge burden off your back and allow you to do more of the things you want to do.

Step 3. Invest

Investing can be a powerful tool for wealth building. This will be the step where you see the biggest jumps in your net worth. Investing can be complex. We hope to make it simple while still giving you plenty of options.

We recommend finding a good balance of funds with the smallest amount of fees. By doing it yourself, you are avoiding management fees and, depending on the fund, commission fees too. Vanguard seems to be the best at this, although there are plenty of other options. Be wary of financial advisers. This article was written by a financial adviser and plainly explains how they make money.

How much you invest is up to you. You should decide on what your financial goals are and proceed from there. Your age will also have a lot to do with how you invest and how much you invest. The more you invest, the more options you will have.

Step 4. Give

After you’ve started the first 3 steps, you will be well on your way to a wealthy life. Part of being wealthy is giving like you are wealthy. With wealth, you have a lot more opportunities to help people. It doesn’t necessarily have to be with money, you can impart of your knowledge of how to get out debt or how to save. People tend to listen more to people who are wealthy and successful.

Feel free to leave comments and ask us any questions. We plan to expound more on these 4 steps as we go.