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5 Pillars of Wealth Building: Accelerated Financial Freedom

Executive Summary: We narrow the process of financial independence to the core five pillars of wealth building. Easy enough to grasp and implement.

Key Takeaways:

Taking the Big Leap when it seems most uncomfortable
You are your biggest financial asset
A purpose driven investing strategy

If you’ve heard of financial freedom, it is the tantalizing image of wealth and happiness painted in many narratives today. But what should wealth look like?

We outline the five pillars of wealth building that foster a richer state of mind. You will experience peace, independence, and freedom from worry.

Wealth means owning durable assets alongside their returns to earn more cash flow. This income covers both your practical and lofty needs.

Riches mean mansions, yachts, and Ferraris. But wealth is the spirit inside the wealthy, which enables them to own and manage assets wisely and profitably. The result is an inward fulfillment that leads to cheerful giving. Philanthropy is often seen in the public domain as an expression of gratitude to the source.

The five pillars of wealth building are the primary ingredients that exist in any personal financial plan. On their own, each is often overlooked for its insignificance or familiarity. But not you. They’re worth being reminded of.

1. The Savings Pillar

The Savings Pillar: First of the Five Pillars of Wealth Building

What is Savings?

We know about saving money. Sure enough, but only a few have an unbreakable pledge to do it systematically or automatically. Saving is ADDITION. This is at the very core of the five pillars of wealth building. Saving gives you another tier of income above the first. Then, consequently, interest is earned, creating a third tier.

Why Save Money?

We save to gather capital to own assets. The easiest path to saving is… (wait for it!);

Artificial Scarcity. A term that denotes the assumption of limited means. The individual is forced to live on less.

How to Save Money?

The first in the list of the five pillars of wealth building:

Living Below Your Means: You’d have to spend far less than you make, and fork the surplus into a safe place you cannot touch.
Define Your WHY: It should be the gift you give yourself, giving you a fighting chance to own wealth-creating assets someday.
Automation Beats Willpower: Set up automatic deductions from your primary source of income. Send the planned 10% (or more) to a money market or cash equivalent holding point. Fund your long-term investments (stocks, etc.) to achieve your financial freedom goal.

2. The Charity Pillar

The Charity Pillar: Second of the Five Pillars of Wealth Building

Now you’ve saved. What next? Remember that you’re not saving to spend later. You’re saving to achieve your short-term and long-term financial goals. These include investing and an Emergency Fund.

Charity, the second of the five pillars of wealth building, functions as your invisible power. This has been proven to give people unseen financial advantages.

Charity is cheerful giving. You should give about 10% (or more) of your income to a good cause. If it goes straight to a church, it’s often known as tithing. You can offer it to the needy through a donation.

Why Give it Away?

It’s not gone anywhere. It’s coming right back to you. Statistically, most wealthy people have a track record of giving.

Instead of seeing giving as a consequence of having more than you need, begin to see it as the cause of being blessed with more than you need.

The rich are known to have this hidden trait. Whether you believe it or not, it’s an invisible force that works in the background.

How to Give

Plan: Plan and automate your giving to the specific cause that touches your soul.
Your Personal Therapy: One of the most powerful of the five pillars of wealth building, this cleanses the human soul. The feeling of helping someone and seeing their reaction or heartwarming results is priceless.
Start with a Budget: The budget will clean up your financial vision quickly. For example, the 50-30-20 budget rule helps you allocate 50% of your income for needs, then 30% for wants. The remaining 20% of your paycheck is free for financial goals, such as charity, investing, and saving.

3. The Investing Pillar

The Investing Pillar: Third of the Five Pillars of Wealth Building

After receiving your paycheck, set 10% for charity, then the next 10% for savings. This savings amount is directed into investing.

What’s the Importance of Investing?

Investing is the art of owning assets for a future gain. If you own financial assets such as stocks, you can expect dividends and capital gains.

Why Invest?

Why not real estate or crypto? For brevity’s sake, we’ll only discuss the simplest investments anyone could own. You plan on making money while you sleep, don’t you?

How about Emergency Funds?

They’re a fantastic way to create contingency savings in the event of a financial emergency. Their main drawback is that they take a while to build. Read further on that topic here.

How to Invest

I’ve written numerous articles over the years about how to invest step-by-step. Investing is a powerful addition to the five pillars of wealth building.

Let’s keep things as simple as possible by considering these steps:

a) Your Loading Phase: Start with a mutual fund that invests in money market instruments if you have debts. Or invest in equity-based mutual funds if you’re debt-free.

The reason is that your position needs to be risk-free so you can pay down debt when needed.

b) Your Next Phase: After your investments hit a goal target of about $10,000 (or equivalent in your region), you should now build an emergency fund. Many articles preach about starting with an emergency fund first.

The truth is, it takes a while to build emergency savings that cover 3 to 6 months of living expenses. By the time you’re done saving, an urgent situation could appear out of nowhere to wipe out the fund.

This makes your game of investing for wealth a “sore travail”. You’ll constantly be procrastinating on setting up your investments.

c) A Basic Emergency Fund: If you save 3 months of emergency savings, resume investing in equities to grow your initial $10K further. You will soon start benefiting from the five pillars of wealth building.

d) What are the Basics of Investing? Dedicate time to study the subject. While you’re getting schooled, invest in an S&P 500 ETF that tracks a significant part of the market.

Foreign individuals can also find portals or apps to invest in American markets. They can find index funds that are similar in their respective countries.

e) Diversify Your Investments: Do not place all your eggs in one basket. You should manage a nice group of investments such as 5 to 10 stocks. This requires research, skill, and portfolio adjustments (rebalancing). These are all simple and learnable things.

f) Invest for the Long Term: Keep on piling up 10% or more of your paycheck until further notice. Stay in the game long enough for compound to work for you. The five pillars of wealth building don’t fail when you take a long-term approach.

g) What if I lose Money?: If you ever get a down year or make paper losses? Don’t sweat it! Everyone has those unavoidable occasional investing setbacks.

Check out the historical results of Warren Buffett, Peter Lynch, George Soros, and Ray Dalio. It comes with the territory. And it shouldn’t spell the end of the world for you.

4. The Collaboration Pillar

The Collaboration Pillar: Fourth of the Five Pillars of Wealth Building

Collaboration is a powerful principle. It is a well-deserved inclusion in the five pillars of wealth building. Did you know that motivation gets heightened when you build partnerships with people?

Use a joint investing account with a spouse or buddy to start creating wealth. On the other hand, an investment club may also be a fun group to join.

What’s Collaboration?

Collaboration simply means partnership with 1 or more investors. If this is a group, it is known as an investment club. Remember to pick your partners well. There’s sometimes a downside to getting this game wrong.

How to Partner with Others

Find a friend with similar interests. Then make sure they have the rest of their lives in order. Without some amount of personal discipline, building collective wealth becomes elusive.

If possible, go alone, but keep an eye out for a good sidekick in the future. Next, if stocks are your primary asset, insulate them from risk with diversification. You could also gather dividends and start earning from underwriting covered stock options.

What Does Collaboration Do?

It is a secret power for building multiples. Two investors don’t just double their efforts; sometimes they end up with 10X results.

Two investments that are different yet co-existing, like stocks and real estate, will prove so powerful. Real estate investors could deploy the net rental income (after costs and expenses) into momentum stocks.

Dividends and cash from covered call options from those stocks reinvested are a big plus.

These strategies are for educational purposes only. It is for experts, but the newbie could draw inspiration if they’re just starting.

5. The Debt-Free Pillar

The Debt-Free Pillar: Fifth of the Five Pillars of Wealth Building

Can humans ever avoid debt? Debt is a normal state of finance for most people nowadays. It seemed like easy money; until they start feeling the financial anaconda tightened their necks.

Why use debt?

You don’t need to borrow money to cover basic costs like groceries, car payments, or personal needs. Debt is good when used responsibly as leverage, like real estate investments.

Becoming debt-free is a very vital pillar in the five pillars of wealth building. But if you’re already in debt, you’re paying interest to someone else instead of receiving it.

The road to wealth can’t be conquered if you’re constantly driving in reverse (subtraction). Instead, your money should always be geared towards growth (addition and multiplication).

The best strategy for overcoming debt is the mindset shift. The minute your debts get wiped away by a philanthropic billionaire, you’re likely to fall right back into it. Because that’s your financial mental blueprint.

Don’t be disappointed if I haven’t given you a step-by-step debt-busting technique. This is beyond the scope of this article. At least now you know you need to:

Stop borrowing immediately (find a practical roadmap for your freedom)
Start paying down your debts immediately (get help form a certified professional)
Save money aggressively (move from subtraction to addition and multiplication)
Start investing at once (even while you’re still clearing your debts)
Make sure your new mindset prevents you from falling back into debt
Live by the five pillars of wealth building in this article

A Few Parting Words about the 5 Pillars of Wealth

Thank you for reading to the end. If you’ve come this far, I want to congratulate you on your commitment to excelling with your money. But remember that the above is not financial advice.

Please do your own research and consult a financial pro. The five pillars of wealth building will lead to long-lasting wealth. There are many more great principles along the way to discover. The important thing is to take action and remain focused.

Which of the 5 pillars struck you the most? I wonder why? Please share with us in the comments section below.

5 Pillars of Wealth Building for Beginners

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