There are many ways to build wealth. Different methods appeal to the comfort level of different people. My approach advocates building a solid foundation and expanding from there.
So ... what's the approach? I'm glad you asked. Here are the phases I use to make it tangible for myself and my clients.
Phase 1: Baselining - At this stage, you're understanding exactly where you stand and what you're working with. Dig in and ask yourself the probing questions. Who do you owe? What do you have? What can you use? *Key metrics here are Net Worth and Free Cash Flow.
Phase 2: Budgeting - Using the information that you gathered while baselining, start defining exactly where your money should go. This is a reoccurring effort that takes place throughout the process.
Phase 3: Growth - This is where the fun begins. Start considering the five building blocks of personal finance: Income, Spending, Savings, Investments, and Protection. Optimizing what you have allocated in each of these categories is how you start to move in the right direction.
Phase 4: Maintenance - It's been said that keeping wealth is even more complex than gaining wealth. I believe this to be true, so this is where you start to build a system for monitoring and using your resources. Creating this system is a part of the support I offer to my clients.
Phase 5: Advanced Strategies - Now that you have a solid foundation, you can take advantage of advanced wealth-building strategies; tax loss harvesting; negotiating equity compensation; utilizing leverage to increase your investment capacity. This is the point where partnering with a Certified Public Accountant who can guide you through the benefits and pitfalls of these strategies would be beneficial.
Bonus Step: Increasing your financial literacy and understanding the psychology of finances will go a long way to accelerate your progress.
So that's the outline. Let's discuss your thoughts in the chat. If you want to understand any particular phase in detail, send me a direct message!
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