Most people believe that the way to financial freedom is by increasing their income. While this can help, developing multiple streams of passive and portfolio income will allow you to live the life you want now, not decades from now. With the average salary in America hovering around $50,000 per year (and ten years to financial freedom), it's easy to see why increasing your net worth is a better approach.
Pillar 1: Spend Less Than You Earn One of the biggest mistakes people make when trying to build wealth is spending more money than they make. In order to get ahead financially, your income should be higher than your expenses. For example, if you spend $3,000 per month and earn $2,500 in an average month (after taxes), you're losing money. The monthly surplus of $500 should go towards saving and investing instead of buying new things.
Pillar 2: Increase Income The best way to increase your income is by developing multiple sources of revenue. Focus on side hustles like freelancing, consulting, or selling things you no longer use. Even if it's just a few bucks per month, this extra money can be the difference between living paycheck-to-paycheck and financial freedom in 5 years.
Pillar 3: Invest wisely Once you've developed multiple sources of revenue, it's time to invest. Index funds are a great, straightforward way to get started with investing. You can read through one of my articles on index funds or pick up the classic investment book The Four Pillars Of Investing for more information.
Pillar 4: Keep the Money Coming In. Investing is the best way to help increase your money, but you can't stop earning once your portfolio starts generating passive income. If you've maxed out your 401k, opened an IRA, or started a side hustle, it's time to look into real estate investing. I am not a licensed financial advisor, and this is not meant to be financial advice.
In order to increase your net worth, it's important to spend less than you earn, increase your income and invest wisely. These pillars will help you get started on the path to financial freedom. This knowledge will allow you to live the life you want now and not years from now. What are some ways that you can start implementing these principles today?