The Third Foundation of Financial Fitness, Ep #11

Justin WallerUncategorized

There are thousands of ways that you can build wealth, but if you don’t have a plan that you can implement, then you’ll never reach your financial goals. Building wealth is the third foundation of financial fitness that we are discussing in this episode of Money Mile.

How did your homework go from episode 10? Did you discover one smart thing to do with your money and implement it? Tell me about your journey to financial independence and let me know how your homework assignments are going. Email me at info@wallerfc.com.

You will want to hear this episode if you are interested in…

  • Starting small [1:12]
  • Saving automatically [2:23]
  • Saving with purpose [7:38]
  • The homework [10:41]

3 factors to building wealth systematically

Since there are so many ways to build wealth, it can be easy to get caught up in the details of trying to find the best one. This will lead you in circles and eventually, you’ll discover that you aren’t any further ahead than where you started. There are 3 factors to building wealth systematically. When you combine all three factors, amazing things can happen in a relatively short amount of time.

Start small

Most wealth isn’t built with giant leaps. Instead, it is built with many small steps that increase over time. You could even start with just $25 per month invested in a low-cost investment portfolio. The idea isn’t to start big, it is simply to start now.

Similar to the way that runners don’t get started by running a marathon, building wealth is done little by little. The best way to start running is by walking around the block and then building up to a run/walk strategy around the neighborhood. In the same way that you can eventually work your way up to 26 miles, you can work your way up to investing thousands of dollars each month. The trick is to get up off the couch and out the front door first.

Save automatically

Pay yourself first is a common refrain and that is what automatic saving will ensure that you do. Once you have a comfortable cash reserve under your belt, you can start building wealth for your future. If you still don’t have a healthy cash reserve, check out The Second Foundation of Financial Fitness. If your employer offers a retirement savings plan like a 401K, this is an excellent resource to take advantage of, and since it comes directly from your paycheck, you won’t even miss the money. Many employers even offer a company matching strategy. Make sure that you take full advantage of any company matching program.

My general framework to start building wealth is as follows:

  1. Build a cash reserve
  2. Take advantage of matching contributions from your employer-sponsored savings plan
  3. Invest in a Roth IRA if you are eligible
  4. Maximize contributions to your employer-sponsored plan
  5. Invest in a taxable investment account

Check out episode 7 to learn how to utilize a diversified low-cost portfolio in your investments.

Continuously improve

Now that you are saving regularly, try saving a little more. Reevaluate your savings plan each quarter. You may find that rather than saving $25 each month you could increase that amount to $50 per month and so on. By incrementally increasing your savings you are taking a proactive step to improve your financial future. Listen in to learn how you can improve your investment portfolio by diversifying the types of investments that you own.

Understand why you are investing

Building wealth is not complicated, but it’s also not easy. It is essential to have a clear vision of why you are building wealth. Setting clear goals helps you stay focused so that you can make the sacrifices now so that you can enjoy an improved financial future.

Your homework this week is to think of one way to improve upon last week’s homework. Now that you know one smart thing to do with your money and have implemented it, consider how you can improve it.

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