3 Simple Steps to Building Wealth


Why do we seem to make the simple things in life more difficult? Take getting out of debt for example. At the core, it’s pretty simple – stop racking up debt, and start paying more on the balance to knock it out!

But the simple things in life aren’t always easy, are they? There’s a difference between the two. Building wealth is not easy, otherwise everyone would be doing it. In fact, it’s very hard, but that doesn’t mean it isn’t simple.

Simple just means it isn’t complicated. Building wealth is not highly involved. In fact, in a few steps you can build wealth. Unfortunately, the majority of folks in America don’t seem to follow these three simple steps.

Becoming a millionaire or just building wealth in general, as this article from Free Money Finance describes, is simple. Although I don’t agree with FMF’s title (he says it’s easy), it’s still a great post to make the point. Below you’ll find my thoughts on his steps to building wealth:

1. Spend Less Than You Earn

If you want to build wealth, the first thing you’ll need is income. No money, no wealth. But, unfortunately I’ve seen time and time again in my business where even folks who are making a good income don’t have much to show for it.

They spend way more than they earn, they live paycheck to paycheck, and they continue to increase their lifestyle with every increase in income they receive.

One thing is clear: in order to achieve the goals you have – whether it’s paying off debt, saving for emergencies, building wealth, or funding your retirement accounts – you must spend less than you make!

How to do it: Set a certain percentage you will save from each paycheck and adjust your budget to help cut back on expenses so you can save more.

2. Invest Your Savings Regularly

Once you set a certain percentage for savings from each paycheck, then you’ll need to figure out where to put it. You can invest into accounts like 401(k)s, Traditional IRAs, Roth IRAs, or non-retirement accounts as well.

Once you figure out what type of account you’ll be investing into, then you need to decide what type of investments to hold in these accounts. These can range from index funds, mutual funds and ETFs to stocks or CDs. There are an endless array of investments to choose from.

The best way to invest wisely is to diversify your money in a portfolio with good-performing, consistent investments.

How to do it: Regularly invest your savings into this diversified portfolio. Consistency is where you will see the traction toward building wealth.

3. Do This for a Long Time

Setting a certain percentage aside for savings, investing those dollars in a well-diversified portfolio of solid investments, and doing it for a long, long time is when you will take things to the next level.

Not taking advantage of compounding interest is one of the biggest mistakes we can make with our money!

When you let time work for you, reaching your goals becomes much easier. That’s why you always hear advisors and bloggers say to start saving early in life!

How to do it: What are you waiting for? Don’t waste any more time, just do it!

Set a target percentage to save and invest into a well-diversified portfolio, and do it for a long time . . . . You’ll thank me 25 years down the road!

What are some other steps to building wealth? If you’ve built some wealth, how did you accomplish that? Leave a comment!

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  1. Jeff

    Three months after I start work, my boss called me into his office, said that I had passed the probation period, then pulled out the forms to fill out to save 5% of my income, which the company would match (it was the early 80s). He would not let me out of his office until I was done, then I had to promise to take them down to the personel office right away.
    He probably singlehandly is responsible for me having a modest amount in my RRSP today, because he started the process 29 years ago.
    Although I have done some really stupid things since, that meeting was the foundation for our fincancial future today.
    So, yes, time is your friend!

  2. Jason Topp

    Awesome Jeff! It’s amazing what consistent, regular savings will do over a period of time!

  3. AJ Reissig

    Great advice! Saving money isn’t all that complex, but so many people can’t seem to grasp the idea of spending less than they make.

  4. Ruan

    As simple as that. Really, I think it’s just a matter of taking action and just doing it. Makes me think of creating a budget for the very first time; so simple yet it took most of us ages to just getting down and doing it.

    Good, old-fashioned discipline. That’s it.

  5. David

    Thanks. Its very true : your 3 point is simple and yet fundamental. There’s so many so-to-say financial consultant out there, who makes things more complicated and confused. Thank God. I bumped in your blog!!

  6. Heather

    In 2011 I lost my job, and then 4 months later we were flooded out by Hurricane Irene. We did get some flood insurance money, but it wasn’t nearly enough to finish rebuilding our home. We ended up taking what little we had (btwn 10-20k) out of a 401k to finish the job. Since then, we have been completely broke, living paycheck to paycheck. While we’ve been taking steps to get our expenses down (we no longer have cable, switched to a $20/month phone plan, couponing, selling items on eBay, etc), I fear that at our age – mid 40’s – we will never have any retirement to speak of. We are not home owners and we have 3 very small children (5, 3 and an infant). I know we need to invest what little we do manage to save, but we have NO CLUE how to invest at all. Do you have any suggestions or references you can share for us to read as to how one can learn how to invest their money? Thanks so much for reading…

  7. Emmanuel

    Absolutely master class. A straightforward way to creating wealth. Before I got married to my beautiful wife, I decided to save atmost 60% of my paycheque for nearly 12months. At the beginning, it was difficult but with time I realized it was worth starting than stand talking.
    Thanks brother for this great article

  8. Jason Cabler

    That’s right, this stuff isn’t hard, you just gotta do it consistently

  9. Heather

    Do you have any suggestions or references you can share for us to read as to how one can learn how to invest their money? Thanks so much for reading…

    • Mr. FI

      Hi Heather,

      I don’t know if anyone running this site responded to you, but I would suggest starting with Vanguard or Betterment. With Vanguard, you should pick an index fund. With Betterment, you simply sign up, pick your stocks/bonds allocation and they will do all the investing for you at an exceptionally low fee (.15%-.35%). You can set it up so that money automatically goes from your bank account to your investments. And there is no minimum amount to start.

      If you need to get to the very basics of investing, shoot me an email or check out my site. Or just google it. There are hundreds (if not thousands) of resources out there that help you get started. This site being one of them.