Your way to building True Wealth
- 1 hour ago
- 3 min read
Years ago, when I was just getting started and had barely a dollar to my name, someone explained to me that early in your career, it takes ten units of effort to produce one unit of results – which feels like rolling a boulder uphill. But if you stick with it long enough, you eventually reach the point where one unit of effort produces ten units of results, and that boulder starts rolling down the other side.
That’s exactly how building wealth from scratch works. It’s slow… until it’s not.
I believe True Wealth is when you reach a point where never have to work for money again – because your money is working harder for you than you did for it.
But here’s the challenge: getting there usually comes from developing a series of boring little habits practiced consistently for a long time.
Habit #1: Spend less than you earn (and pay yourself first)
Here, in five words, is the key to building wealth: spend less than you earn.
As quickly as you can, aim to save 15% of your gross income and learn to live on the other 85%. If debt is in your way – credit cards, car loans, other non-mortgage debt – add another 5% to attack those balances, then find a way to live on 80% of what you earn.
And here, in just three words, is the trick to making that happen: pay yourself first. Before the landlord, before the car payment, before Amazon. As George Clason put it in the financial classic, The Richest Man in Babylon: “A part of all you earn is yours to keep.”
Habit #2: Build a safety net
Before you start thinking about investing, start creating a safety net – an emergency fund that stands between you and the next surprise expense.
A solid long-term target is up to 30% of your annual income set aside. That’s a big number, and it can take time to achieve. But you can speed it up by funneling “extra” income toward it: bonuses, overtime, tax refunds, part-time earnings, even selling stuff you don’t need.
Keep these funds safe and liquid – in a high-yield savings or money market fund – and do your best to leave it alone.
Habit #3: Make debt run in reverse
Remember: when you save and invest, compounding works for you. When you borrow at interest, compounding works against you.
So, list your non-mortgage debts from highest interest rate to lowest, pay minimums on everything, and apply that extra 5% of your income toward the top balance until it’s gone – then move down the list.
Habit #4: Start retirement saving early (and take the free money)
Even while you’re building your emergency fund and paying down debt, start saving for retirement – because time is your greatest financial asset.
If your employer offers a 401(k) match, make sure you’re getting all of it. That’s free money you can’t afford to pass up.
How to make it work: automate it
Here’s the trick that makes all of this easier: get the process started and then get out of the way. Make it automatic.
Set a percentage, invest it consistently, rebalance annually, and stop checking your balance every day. Let time do what time does.
And don’t fear volatility when you’re in the wealth-building years. If you’re investing regularly, market pullbacks can help you buy more shares at lower prices. Dollar-cost averaging is a simple, ingenious technique that puts market volatility in your favor.
Your 30-day starter plan
If you want a practical way to begin, do these things over the next 30 days:
Track every dollar you spend.
Calculate what percentage of your gross income you’re paying yourself, then map a plan to reach 15%.
Rank your non-mortgage debts and aim another 5% at the top one.
Figure out how to spend the remaining 80% of your income more effectively.
Get what’s coming to you from any 401(k) match.
Save, invest, compound – and never stop.
Because one day, if you stay with it, you just might discover sooner than you realize that you don’t have to work anymore, at least not for money.
Opinions expressed in the attached article are those of the author and are not necessarily those of Raymond James. All opinions are as of this date and are subject to change without notice. It is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Investing involves risk and investors may incur a profit or a loss.
Every investor's situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation.
