3 Pillars of Financial Success: Key Concepts You Need to Know

Introduction: The 3 Pillars of Financial Success

Financial success is a universal aspiration, but achieving it requires a solid foundation built on key principles. In this post, we’ll delve into the 3 pillars that form the bedrock of financial success: Make It, Save It, and Invest It. These pillars not only guide you toward stability but also pave the way for growth and prosperity. This framework will help you separate out the activities needed to move to the next level. Let’s explore how these concepts work together to create a strong financial future.

Pillar 1: Make It

At the core of financial success lies your ability to generate income. Unless you’re getting a big inheritance or winning the lottery (lucky you!) then you’re going to need a source of capital to get started in your financial journey. We get that money by trading for a service or product.

Most people start by selling their time as a professional such as an accountant. They are operating a service-based business as a W-2 employee. You could also be an independent contracted accountant. Or maybe you run an accounting firm that provides accounting services. In any case, you’re selling accounting services in exchange for money.

It is great to know how to save money and how to invest that money to make great returns, but it is hard to make meaningful progress unless you can make a substantial amount of money. This website is dedicated to retiring in less than 10 years so retiring after 40 years from your 401k contributions and social security ain’t going to cut it.

You Can’t Save What you Don’t Have

Being “retired” means that you have enough cash coming in from your investments to cover your living expenses. Most investment vehicles make between 2-20% annual returns with 10% being a good target. So if you need 50,000/year to live and can generate a 10% return consistently, you need 500k invested to retire. You aren’t going to be able to save 500k working minimum wage.

Many people don’t have an investment problem, they have an income problem. They’re living paycheck to paycheck or investing a percentage of a small amount of income. The first thing we want to do is to get our income up. This makes the entire journey so much easier. If you were making 7 figures per year do you think you would struggle to retire in just a few years? Me neither.

Whether you’re climbing the corporate ladder or exploring entrepreneurial avenues, increasing your earning potential is essential. Seek out opportunities to advance in your career, acquire new skills, and position yourself as an expert in your field. Additionally, consider side hustles and freelancing gigs that align with your passions and skills.

Remember, investing in yourself pays dividends in the long run. Education, certifications, and professional development can lead to higher-paying roles and open doors to new opportunities.

Pillar 2: Save It

Earning a substantial income is only part of the equation; disciplined saving is equally crucial. If you make $1M per year but spend $1.2, you’re completely broke! Savings is a skill and a discipline. I recommend that you always aim to save a certain percentage of your money. You can save more but never save less. 25% after tax is a good start, but try to get this up to at least 50%. It will get easier the more money that you make.

Begin by creating a budget that outlines your income and expenses. Be mindful of unnecessary expenditures and prioritize needs over wants. A cornerstone of saving is the emergency fund – a financial cushion that safeguards you from unexpected events. The emergency fund is the first savings goal. Start with a 10k emergency fund and then build it up to 6 months’ expenses.

Automating your savings ensures consistency. Even if you start small, the habit of setting aside a portion of your income each month contributes significantly to your financial security. By saving diligently, you build the resources needed to explore more substantial financial ventures.

We’ll go over tactics in a later post, but for now keep in mind the key principle that you save to your goal and spend the rest, not the other way around. Always pay yourself first!

Pillar 3: Invest It

Turning your hard-earned money into wealth requires smart investments. While saving preserves your existing funds, investing allows your money to work for you and grow over time. Diversification is key; consider a mix of investment options, such as stocks, bonds, and real estate.

Real estate, in particular, offers both appreciation and passive income potential. Investing in retirement accounts, like 401(k)s and IRAs, ensures a secure future. Understand that investments carry risks, but with proper research and guidance, you can minimize these risks and optimize your returns.

Once you get your emergency fund created, direct all additional savings into education to increase your income and/or invest to create an additional return.

The Symbiotic Relationship

These three pillars – Make It, Save It, and Invest It – are interconnected and reinforce one another. A higher income enables more significant savings, which, in turn, fuels your ability to make strategic investments. This symbiotic relationship forms the foundation of your financial journey.

Conclusion

Financial success is attainable for everyone, provided they build upon the 3 pillars of financial success: Make It, Save It, and Invest It. By focusing on maximizing your income, practicing disciplined saving, and making informed investment decisions, you can create a secure and prosperous future. Remember, the journey might have its challenges, but with determination and these pillars as your guide, you’re well on your way to achieving your financial dreams. Start today – your future self will thank you.