SPF » Wealth Management » The Three Pillars of Wealth

The Three Pillars of Wealth

Whatever your financial goals are, whether you want to become financially independent, whether you want to retire early or keep a lifestyle that social security alone does not support, you need to build wealth to achieve these goals.

Three Pillars of Wealth – Photo by Miltiadis Fragkidis on Unsplash


The first pillar of building wealth is a budget. A budget is a tally of incomes and expenses. You do not have to do a detailed accounting, but you need to know in rough brush strokes where your money comes from and what you spend it for.

For most people, both are not fixed. You can grow your income through changing jobs, a promotion, working overtime, or taking on a second job. You can also grow it through a side hustle or business.

Some of your expenses are fixed, some are fixed only for the time being. Other expenses are discretionary. The fixed expenses are housing, transportation to work, basic food, and all the other necessities in life. Other expenses you decide on a day-to-day basis, such as dining out, vacations and travel, or all sorts of service subscriptions.

Tallying your budget can be a look into the past, where did my income come from, what did I spend my money on. But it also can be a plan for the future. I can use the look at the (recent) past to set limits on spending for certain categories and hold myself accountable to stay within those limits. I can also make long-term plans to boost income or reduce spending.

You can work on a promotion or apply for a new job to boost your income. It will take a while, but it might improve the balance of your budget by significant amounts.

Furthermore, you can cancel subscriptions or plan on moving to cheaper housing to reduce your expenses. You can also sell off the stuff you don’t really use, such as extra cars, motorcycles, or boats. The biggest leverage in the expenses is to reduce debt. Because anything you buy on credit costs you not only the price of the goods but interest in addition.

The goal of the budget is to keep it in balance or better to achieve excess funds you can save for longer-term goals.


The second pillar of wealth is saving money for future expenses. Some expenses exceed a monthly or even yearly income. If we want to pay for them at some time in the future, we need to put aside money as savings towards this goal.

The best way to save money for the future is to make it automatic. But the budgeted savings amount out of your regular accounts, right when you receive a paycheck. That way you don’t feel it that much and can enjoy your savings to grow steadily.

When your saving goals are long-term, you want to think about investing the savings into something that brings you extra income.


The third pillar of building wealth is investing your money into something that produces a return. For example, investing your money into a savings bond may return you some interest. Also investing your savings into a rental property will pay you a return in form of your tenant’s rent payments. Another very popular investment is buying stocks that may pay dividends and/or rise in the price of the share.

Whatever you invest in, it has to give you a return on investment. The benefit of a return on investment is that it is additional income, that you may save to accelerate building wealth. And if your goal is long-term in nature, such as retirement, this return on investment can double your actual savings.

Of course investing also carries risks, especially the risk to lose some principle. However, this is true for any savings, as they lose value through inflation. Even money under the mattress can be stolen or lost by the house burning down. Smart people understand the level of risk they want to take and how to keep the risk low by not putting all eggs into one basket.

Are you building wealth?

Do you know your financial goals? Do you have a plan to achieve them?

Have a look at your personal finances and see if you have a budget in place if you know your income and your expenses. Furthermore, are you saving money regularly, and have you automated your savings? What is your investment strategy? Do you know what investment risks you are taking and do your investments match your personal risk tolerance? Can you track your wealth-building progress towards your goals?

If you can answer YES to these questions, you are well on your way to wealth and financial independence.

Leave a Comment

Your email address will not be published. Required fields are marked *