Wealth Building Principles & Practices

There are two ways to climb a world class mountain, heavy and slow, which is laborious and time consuming, but safe, and light and fast, which is relatively easy and requires a fraction of the time, but it is extraordinarily dangerous. I’d call the former a principle for successful mountaineering, and the latter, a rare exception pursued by the reckless. Accumulating the wealth required to fund a lengthy retirement and leave a meaningful inheritance to one’s children and grandchildren isn’t easy, but it isn’t complicated, either. Only the consistent application of tested financial principles over time brings reliable success to a feat precious few Americans ever attain. Perhaps this is because we weren’t taught financial principles in school, but the deficit needn’t prevent our careful apprehension, and practice of the principles! Do more than consider the following:

• Don’t place too high a value on money or it will betray you and leave you empty and broken. It’s not the end; it’s only a means. Hold it loosely and give it generously, especially to those who can’t pay you back. Wealth building is simply the right thing to do, nothing more.
• Torch your excuses and take responsibility for your financial life. You are a distinct financial entity, and your family, a micro-economy. Your success or failure is the result of nothing more or less than the sum total of your decisions. Purpose to consistently make wise decisions, and gain the knowledge fitted to the venture.
• Climbers who don’t launch from a base of strong conditioning suffer, and often die for the mistake. The financial world is no different. Begin by building your foundation: 1) adequate emergency savings, 2) a specific schedule of payments to pre-retirement debt freedom, and 3) term life insurance sufficient to give your family opportunity to carry-on the mission in your absence.
• Maintain a strict budget to maximize net positive cash flow (net income exceeds gross expenses). This reveals your potential for investing and giving. Purpose to make prudent decisions with this critical resource.
• Invest in a primary career consistent with your talents and abilities. Work hard, place honor above gain, and advance yourself with specialization in your field. This is the bread and butter of your financial life; don’t forfeit it without deep consideration.
• Allow compounding returns to build your investment portfolio for you. This is the most important wealth building principle. Own primarily boring businesses with steady cash flows, and reinvest dividends for decades. Seldom invest in non-income-producing ventures, and require speculations to be tiny and infrequent.
• Apply the logistical trio of dollar cost averaging, diversification, and maintaining an exit plan on all non-forever holdings (from the date of purchase). The most conditioned climber in the world needs to frequently eat and drink. Feed your portfolio with automatic purchases, try to keep each holding to less than 5% of the whole, and confidently run with your winners while cutting your losers with ruthless expediency. Keep unproductive capital on the same leash you would a spastic puppy.

Financially speaking, the world consists of two types of people, wealth producers, who apply the above (and other) principles and practices, and wealth consumers, who don’t. Determine to be a wealth producer, practice the principles, and be thankful to the One from whose hand every good thing comes. Think about it. Shaun

“A wise man leaves an inheritance to his children’s children.” ~Proverbs 13:22

The opinions voiced in this material are general, are not intended to provide specific recommendations, and do not necessarily reflect the views of LPL Financial.

Dollar cost averaging involves continuous investment in securities regardless of fluctuation in price levels of such securities.?An investor should consider their ability to continue purchasing through fluctuating price levels.?Such a plan does not assure a profit and does not protect against loss in declining markets.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio.?Diversification does not protect against market risk.

All investing includes risk including possible loss of principal.