4 Steps to Build Wealth: Working Income, Savings, Investments, Simple Living

There are four steps to building wealth: working income, savings, investments, and simple living. Together, they support goals like:

• Financial independence (more money coming in than going out) and
• Retirement (no longer having to work for money).

Working income

This is how you become financially free. It all starts with your working income. The more you earn, the more you can save and invest.

How can you earn more? Increase your value by investing in yourself.

Hone in on the industry and exact job you want and work to be a master at the skills required to get the job done.

As you get better at your job, you’ll learn how to provide better solutions and the opportunity to earn more income increases.

Some ideas on how you can get started and work to master your skills:

• Get some intel from others in the industry (ask good questions)
• Take online courses (free Harvard online courses, Alison, ExpertRating)
• Read books, and / or getting some real world experience
• Go back to school and continue your formal education

Eventually you’ll be in a position to earn more, save more, invest more. 

Savings

You can start saving by putting 10% minimum of working income into a Cash Reserve (aka emergency fund).

Rules for Cash Reserve:

• Equal to 6 months of expenses
• Don’t touch it unless you have to

Once you save up a Cash Reserve, start putting that 10% minimum from working income into a Financial Freedom Account that will be used for future investments.

Investments

As your Financial Freedom Account grows, the next step is to invest it.

The better you are at investing, the faster your money will grow.

As your money grows, so does your Net Worth, which is a tool to measure how wealthy you are.

The goal is to invest a little bit every month.

Look into Roth IRAs and Index Funds if you haven’t already; the sooner you start investing the better.

The more you learn, the more you earn.

Simple living

Simple living is how to get to financial freedom sooner.

The goal is to consciously create a lifestyle where you need less money to live on (housing and car payments being the two biggest).

This increases your savings and the amount of funds you can invest.

Think roommates, used cars, biking / walking more, buying a duplex – living in one unit and renting the other, thrifting clothes and furniture, saving items in the cart for later instead of buying them now.

Keep your monthly expenses as low as possible.