How to Build Wealth Fast- This Chart Shows What it Takes

Embarking on the journey to financial prosperity requires a roadmap. 'How to Build Wealth Fast' provides that essential guide, illuminating the path with a revealing chart. Discover the strategies and steps that can accelerate your wealth-building process.

How to Produce Investment Income Forever

Calculate how much investment income you want it to provide you per year

A common rule of thumb is to withdraw no more than about 4% per year if you want your portfolio to last forever
In reality, your withdraw rate depends on what rate of return your portfolio delivers
Max withdraw rate = Annual RoR
Annual Inflation Rate
This figure should serve as an absolute upper limit, and ideally, you should keep it lower
The life expectancy for someone who is currently 65 is about 85, according to the Social Security Administration’s actuarial data

Final Words

Use a framework like the one described here to map out what your target wealth level is, and how to get there

Break down wealth accumulation into smaller variables to see realistic paths forward
Figuring out how much investment income you need when you retire or become financially free is a good starting point
You can determine the combinations of monthly contributions and rates of return you need to achieve those goals

Personal Capital

Graph of your net worth over time

How to Get Rich

Realistically, building durable wealth takes time. You can accelerate that process in multiple ways and build wealth quite fast, but it’s always critical to have a long-term outlook.

The key is to put your earned money into reliable investments, like index funds, dividend-paying stocks, cash-producing real estate, and more.

Pay off high interest debt now

High interest credit card debt, unsecured loans, and basically anything over 6% per year needs to be paid down right now.

Consider it an emergency and work extra hours or do whatever it takes to fix that this year. You’ll thank yourself later.

Here’s a wealth matrix to help answer those questions:

If you have a certain level of wealth that you would like to achieve in the next 25 years, here’s the combo of the monthly saving amount and the rate of return on your wealth you’ll need to achieve that target

Levels over $1 million are highlighted in green
The monthly savings numbers are inflation-adjusted, so if you look at the row for saving $1k/month, it means continuing to save an inflation adjusted $1K each month for the 25 year period

How to Build Wealth

There are really only two things to get right

Increase the difference between your income and expenses
Save that difference and grow it exponentially
The vast majority of people never build any serious wealth.
They just stay afloat, spending as much as they make.

How to Achieve a High Growth Rate on Your Savings

You’ll want a blend of several of these asset classes for optimal diversification

Treasuries, Corporate bonds, Municipal bonds, Savings accounts
Investment-grade bonds only give about 3% annual returns currently
Bonds and savings accounts have a place in a conservative portfolio, but they’re not going to build you a ton of wealth over the long-term
Expecting somewhere in the lower end of 4-8% returns would be reasonable
The most likely paths to reaching this level going forward will be: High-yielding dividend stocks with reasonable payout ratios and long histories of consistent annual dividend growth
Emerging markets and other international stocks or ETFs trading at low valuations
High-quality Real Estate Investment Trusts and Master Limited Partnerships
Certain alternative investments that offer decent returns in exchange for lower liquidity

Mercilessly cut spending on things that don’t serve you

Spend liberally on what you love, and cut ruthlessly what you don’t.

Being frugal and pinching pennies can be boring and unsatisfying, but simplifying the possessions around you, traveling lightly through life, and spending your time and energy on projects that interest you can be incredibly satisfying.

Seek out higher income streams

There are three main ways to approach this: Focus hard on your career and earn a high income for your expertise

Work a decent job and have a profitable side-hustle
Go full-on entrepreneur and start a bigger business

Establish an emergency fund for liquidity

Around the same time as you’re paying off debt, you need to have some money on the side.

5 Tactics to Build Wealth Fast

The hardest part about building wealth is just starting. After that it gets easier, as you build and build on the initial momentum.

General order of what things to tackle first
Some things are best saved for later (like investing), while other things need to get done right away (like paying off debt).

Invest money as soon as you get it

The first priority should be putting a lot of that money into investments before it becomes spendable

Set it up for automatic withdraws from your checking account if possible.
Put additional money into your 401(k), or start putting cash into taxable accounts.

Financial Freedom Calculator

Adjust the following variables to see how different scenarios play out: Current portfolio value, Yearly savings amount, Expected long-term rate of return, Withdraw rate for determining passive investment income, Effective tax rate on your investment withdraws