The Building Blocks of Prosperity

I’m going to let you in on a little secret. It is the secret to wealth. Are you ready?

The way to prosperity lies in 2 things. (ok, maybe 3)

1. Spending less than you earn.
2. Putting your saved money to work so it earns you money.
3. Reinvesting the earned money gained from point 2.

and that’s it! (no Holy Grails, no Journey to the West needed). If we represent your income with a long rectangle, and your expenses as a shaded rectangle within that, what you have left looks like a brick. True wealth is made from accumulating many, many of these bricks throughout your life. It should be a lifestyle. This would mean simply, spending less than you learn.

How much to save?

It is well known that 10-20% of your monthly income should be saved, up to an emergency fund of 6-9 months. Therefore, if your monthly expenses are $3000, then one should ideally keep a fund of $27000 (9 months savings) for emergency use. If one needs to amass this fund quicker, some ways are to save up more at the start and ease up when one has reached this goal.

There are various ways and means of how to save this set amount, but what I used was the Standing Instructions with my bank and setting up a separate savings account. I don’t touch this savings account, the bank automatically credits my savings monthly and I live on the rest. Any balance I have from Bank Account #1 at the end of the month goes to Bank Account #2 (maybe a little treat for self reward, like some nice food). And that’s it! Banks have this as a feature, so you can pick and choose which bank you would like, but this is the underlying requirement to build wealth. Without this, nothing works.

Here's to good health and I hope you prosper.