02/19/2021
I've received many requests for help getting started with wealth building. Each persons situation is different so I'd like to offer some basic steps to consider that I think apply to everyone.
1. The first key to wealth is your savings rate. Aspire to save 20% of your after tax income. Anything worth while takes some delayed gratification. Find a way.
2. Weathering the storms. You must put aside 6 months of your monthly expenses in a savings account if you lose your income source. If you use these funds for anything other than supporting your family during a job loss, your long term wealth plan will most likely be dashed.
3. Buy assets, not liabilities. Assets pay you. You pay for liabilities. Your primary residence is not a true financial asset. It is an emotional one. Don't let anyone convince you otherwise. I don't remember my home ever cutting me a dividend check.
4. Debt. Outside of your primary residence don't use debt to buy anything. If you cannot afford it, save for it. You think you can get wealthy by doing what everyone else does? Wrong.
5. Ego. Don't buy flashy homes or cars until your assets can pay for them. Sucks huh but most people who look rich aren't. Money talks, wealth whispers.
6. Educate. Learn about investing in assets that appreciate and produce free cash flow. Start buying them. Read material written by Warren Buffett. He's the best teacher on the subject. Read his Chairmans Letters. When you find a term you don't understand, look it up. Make learning a habit. Do it every day. Today, most asset classes are elevated due to low interest rates and government spending. While prices are high, learn about how to determine a fair price for an asset. Learn how how the world works. Learn to play the game.
7. Seek and find. If you have no interest or time or energy for point number 6, find a financial advisor. You can learn how to find the right kind of advisor for you by researching online. I'm of the mind that you want an advisor that charges you an annual fee for overall guidance, not one that charges you a fee on your overall assets.
8. Patience. Wealth is built over decades. Establish these habits and be patient.
9. Be bullet proof. Stay mentally and physically healthy. None of this matters if you end up sick, weak or mentally unstable.
10. Pass it on. Be a powerful example for your children, family and friends. Recognize that to be truly wealthy you must find a way to give back so others can rise as well.
