The third pillar of financial planning is building wealth. Once everything is organized and you’re not overextended, making progress on your goals is the final and most important step. Many people start building wealth and skip organizing or protecting it first. They look at the stock market as a proxy for how their financial life should be doing. They may make retirement contributions or work on growing the business. But at the end of the day, feelings of discomfort and insecurity often surface. Not because they are doing a bad job, but because they are on a journey without a clear direction. Building wealth is all about being intentional to reach the places you want to go.
Key Takeaways
- Building wealth is about planning how you will intentionally increase the financial resources available to accomplish what matters to you.
- When building wealth, ask yourself if an investment/business/property/new job/etc. will help you achieve your goal. This helps you think more like a planner instead of simply reacting to what is in front of you.
Why Building Wealth is Important
Those who want to know how their stocks are doing, or whether the rental property is making them money, generally miss a stronger undercurrent. Money is meant to be a tool to help you reach your financial goals. In my opinion, it is not meant to be the thing worth striving for. Whether you have 3 extra zeros to your name (or 3 fewer zeros), you are still the one who has to live your life. Would you rather have more money or a more fulfilling life? That’s the beauty of personal finance, investing, and business. If you focus on the life you want to live, you can start making better decisions about what your money needs to do.
Therefore, building wealth is not simply about investment returns or EBITDA. It is about using the tools in your financial world to help you feel successful. Having more money does not necessarily make you more successful. Having deeper relationships, a stronger family, employees who love their job, coworkers who care about you, and other examples could be a truer sense of success.
Taking this philosophy should create a mindset shift in most people. You’re no longer worried about an individual investment making money or putting all your hope into one business. Instead, you ask: “Will this [investment/business/property/new job/etc.] help me get where I want to go?” This helps you think more like a planner instead of simply reacting to what is in front of you. If we can see all the different pieces in your financial plan and what they build toward, we can better understand how likely you are to reach your goals.
What It Means to Build Wealth
One reason organizing and protecting your wealth is as important as building it is that, once all three are aligned, it lets you dream about your future. The cliché quote “a goal without a plan is just a wish” fits here perfectly. Many people dream of retiring, traveling, starting a new business, getting a dream job, not feeling stressed about money, and so on. But without having a plan to get there, however vague or specific, their dreams cannot become a reality, and they stay stuck where they are. These dreams, goals, and values should be the bedrock for what each person is building with their wealth. Building wealth means intentionally increasing the financial resources available to accomplish what matters to you.
Intentionality is the silver bullet to build wealth. Generally, when I talk with someone contributing to their 401k, I am almost always told in one way or another, “I just take it out of my paycheck and try not to think about it.” In one sense, it is great that people save for retirement, but then I’m always curious how they knew how much to save in the first place (which they generally don’t know). The point is, if retirement is real and desirable, then having a defined plan to get there is worth building. Those same people are generally shocked when we show them those savings mean they can retire early. Showing them the path they are on helps them see the bigger picture.
Personal finance requires trade-offs. Spending more money today means saving less for the future. Putting more money back into the business means less for your family to live on. If you are going to be aggressive with some parts of your financial plan and conservative in others, it is worth choosing what that is. Defining what is important to you can change your financial perspective, and you no longer need to do what everyone else is doing and try not to look at it. Do you want to be more generous? Do you want to sell your business? Retire? Travel? Take time to think about what you want and then start building toward it.
How to Build Wealth
Once you know where you want to go, the next step is figuring out how to get there. If it were easy enough, you would have already done it. This is where the significance of money re-enters the picture. Growing your wealth may be required to reach your goals, and that is a perfect reason to build your assets and income. Sometimes people feel guilty about making money and “becoming rich,” but that guilt often comes from not connecting it to why you are making money in the first place. There is nothing wrong with making 6 or 7 figures if you are on a mission to change people’s lives for the better. There is nothing wrong with saving up millions in a retirement account so you can be generous to your family in that season of life. Whether it is retirement contributions, scaling a business, investing in the stock market, or buying more real estate, all financial actions should serve a higher purpose.
Along with growing what you have, keeping what you are building is equally important. When protecting your wealth, it is important to take calculated bets and not take on too much risk. Some ways to grow your wealth may also involve reducing the negative effects of certain investments. For example, tax planning strategies can be a great way to reduce your lifetime tax bill and put more dollars towards what you want. Costs, expenses, and/or fees could also fit into this category. Think of it like a business: we could increase the income coming in or decrease the expenses going out.
Ultimately, the best goals are worth waiting for. The hardest part of building your wealth is sticking to the plan you build. It may take months and years to reach your financial goals, and that is okay. As long as the vision remains the same, you keep taking the actions it takes to get there, and then let time do its thing.
Build Your Life
Building wealth is about using money to build the life you and your family want. You don’t have to have everything figured out. You don’t have to know exactly what you want out of life. Instead, focus on your dreams today and build a plan to get there. Understand and organize everything you have, make sure you are financially protected when life hits, and do the things you want to in your life. Generally, as people adopt this framework over time, they begin to understand how money can work for them, not the other way around.
