In the pursuit of financial security and independence, everyone wants to know what the secret to building wealth is. Earning income moves the needle in the right direction but it often seems impossible to build wealth with. If you are starting from ground zero, like I did, your wealth journey starts with your earned income. The problem is, that many people aren’t effectively applying the golden rule of wealth building. Using the 50/30/20 rule (50% to expenses, 30% to savings, and 20% to investing) can give you the start you need if you consistently invest that 20% of your income.
The goal of achieving financial freedom is often at the forefront of our financial aspirations. Investing 20% of your income accelerates this journey. It provides you with the means to pursue your passions, start a business, or embark on new adventures without being constrained by financial worries. Albert Einstein famously called compound interest “the eighth wonder of the world.” It’s the concept of earning interest on both your initial investment and the accumulated interest over time. By investing a portion of your income, you set the stage for exponential growth, as you allow your money to work for you.
When you are able to create structure and discipline around putting that 20% into investments it begins to open up opportunities for passive income. You can easily generate passive income streams through dividends from stocks, rental income from real estate, or interest from bonds. These sources of passive income can provide financial stability and even fund your lifestyle, giving you more flexibility and control over your time.
The great thing about using this method to build wealth is that it creates a safety net for you. Investing 20% of your income doesn’t mean putting all your money at risk. By establishing a diversified portfolio, you spread your investments across different asset classes and reduce the impact of market fluctuations. This provides a hedge against inflation, as generating returns can potentially outpace the rise in living costs, which ensures that your money maintains its value and continues to grow, as you balance risk and reward.
Having a robust investment portfolio can alleviate financial stress. Knowing that you have a solid financial foundation and a well-prepared future provides peace of mind and allows you to focus on enjoying life rather than worrying about money but it starts with investing that 20%.
Wealth is not built in isolation, it’s important to surround yourself with people who will help you stay on track. Learn from those who are where you want to be, seek help from financial experts, and increase your financial knowledge. Attending conferences, seminars, and workshops, such as our upcoming Wealth Building Workshop are great ways to learn how to build structure and discipline around consistently investing that 20%.
Investing 20% of your income is not just a financial strategy; it’s a commitment to securing your future and creating opportunities for a fulfilling life. It empowers you to take control of your financial destiny, achieve your dreams, and leave a lasting legacy. By embracing this golden rule of wealth building, you embark on a transformative journey toward financial prosperity and freedom. The secret to building wealth boils down to a commitment to consistent saving and investing. Remember, it’s never too early or too late to start. Begin today, and watch your wealth grow.