Building wealth is a four step equation: working income, savings, investments, and simple living.
- Working income
This is how we become financially free. It all starts with our working income. The more we earn the more we can save and invest to get to our passive income and real estate goals. (Be careful of lifestyle creep, which is earning more and thus spending more, if we earn more we should be saving more, right?)
How can we earn more? increase your value by investing in yourself. Eventually you’ll be in a position to earn more, save more, and invest more.
- Savings
Start by saving a decent portion of our working income. It’s a common practice to have 6 months of expenses saved up in a high yield savings account. Once that account is established, continue to set money aside into a financial freedom account. This is “paying ourselves first” and is the beginning of the plan on how we are going to get to retirement, and eventually, early retirement.
- Investments : passive income poa
Then move to the next stage and invest. The better we are at investing, the faster our money will grow and generate a greater net worth – which is a tool to measure how wealthy we are. The Roth IRA (retirement account) is a great place to start, along with a normal brokerage account, and – if you’re up for it – rental property. (This is a job)
- Simple living
Simple living is how to get to financial freedom, sooner. Consciously create a lifestyle where we need less money to live on (housing, car payments, and food are the three biggest). This increases our savings and the amount of funds we can invest.
That’s really all there is to this financial game of life.
The first domino is working income. Here is a small riff on that:
INVEST IN YOUR EDUCATION: Plan to attend school – college or vocational. Community college is hard to beat or look into two year degrees. Here are some things to look for colleges:
- Average starting graduates salary
- Percent of grads that receive job within 6 months
- A great career center that will help you find a job along with a good career fair
HAVE A PLAN: Find someone who has done what you want to do – the good, bad, and ugly.
- Did their career path make sense for them?
- If they could do it again would they?
- What advice would you have for someone looking to follow in their shoes?
- And have fall back options, if plans change can you pivot?
USE YOUR HEAD: If heading to school, think long and hard about getting a degree that won’t pay for itself. On the other hand It’s important to pick something that excites you at least a little bit or work is going to be a drag for a loooong time. Do you need a degree to do what you want to do?
Food for thought.
Joe DiAndrea 