16 Ways to Build Wealth

Water background. Pink title "Want to Build Wealth?" The remaining text is black. Four slightly transparent color boxes. Each has a theme and four examples. Green: Income, Red: Expenses, Yellow: Protection, Blue: Goals

Want to Build Wealth?

Let’s play four square!

There are thousands of ways to build wealth. This post focuses on 16 of them across four areas:

  • Income

  • Expenses

  • Protection

  • Goals

Income

Focus on Superpowers

Unique skills drive higher compensation. Strengths fuel success.

Weaknesses must be shored up with minimal effort:

  • hire solutions,

  • partner with teammates who have complementary skills,

  • develop new skills…

Focusing on weaknesses tends to yield linear results. Focusing on strengths may produce exponential results.

What do you do extraordinarily well? What can only you do? How could you do more of those?

Track results! What gets measured gets improved.

Documenting the impact also helps with:

  • performance reviews,

  • client conversations,

  • interviews, and

  • other important meetings!

Take Calculated Risks

Another key to driving income is to take appropriate risks. That might be with:

  • career opportunities,

  • projects,

  • investments, or

  • all three!

Risk and return are inherently linked. Consistently playing it safe on average results in predictable, yet lower, compensation.

Always making the safest choice can actually be risky! Staying inside a comfort zone restricts skill development and impact. In the private sector, a career which stalls is in trouble.

Two metal chain links. One is cooler. Another is molten red. There's a white arrow from the cooler link to word RETURN written in white marker. There's another white arrow from the red hot link to the word RETURN in white marker.

Catch Free Money

If someone’s going to throw money, catch it!

Opportunities include:

  • Stock options and grants

  • Company retirement plan match

  • Spending accounts which fall to zero at year end

Whether or not someone can take full advantage of opportunities depends on their specific situation.

Be a Lifelong Learner

Continuing to develop will help ensure skills never become obsolete.

Learning can also help someone:

  • connect seemingly unrelated dots,

  • discover new passions, and

  • meet great people.

Man in a wheelchair in a library listening to headphones while watching a tablet. White text in the upper-left says: "Be a lifelong learner"

Expenses

Own Long-Term

The annual cost of almost everything is lower with long-term ownership:

  • homes,

  • vehicles,

  • clothes,

  • investments…

Someone with a long-term ownership mentality takes different steps:

  • Conducting maintenance and making repairs proactively

  • Installing a phone case and screen protector

  • Using shoe trees and taking other measures to extend clothing life

A stitch in time saves nine.

Sewing machine working on denim.

Cut Hidden Costs

One of the quickest ways to reduce spending is to cut unused or unnecessary expenses.

Some examples include:

  • unused subscriptions,

  • financing charges,

  • investment expenses,

  • late fees, and

  • fraud.

Also, it rarely makes sense to finance a toy.

If someone can’t afford to pay cash for it, they usually can’t afford it.

Four images in the background: a sports car in front of a cliff, a yacht plowing through the water, an RV on a snowy mountain, and a jet ski doing a backflip at sunset. The word Finance?! is written in red text with black outline.

Bring Lunch

My mom’s friend made lunch for her husband for over 30 years. She did it first thing in the morning - basically in her sleep!

Saving:

  • $5 a day,

  • 200 days a year

  • over 30 years

  • invested at an 8% return…

would result in over $122,000 after 30 years!

While literal, “bring a lunch” is also a metaphor. It’s about taking a mindful approach to recurring expenses.

Image of a hand adding a cucumber slice to the makings of a sandwich, complete with bread, cheese, meat, and tomato. Lettuce appears to be in the background. Another piece of white bread sits nearby.

Be Intentional

Every dollar spent reduces financial flexibility for two reasons:

  1. It lowers how much can be saved and

  2. It reduces costs, thereby reducing how much someone needs to save to achieve financial independence.

Knowing expenses is crucial.

The next steps is to evaluate expenses to ensure they’re worth the hours required to work to pay for them:

  • Double down where they are

  • Cut back where they aren’t

This framework helps bring awareness to what may otherwise be subconscious decisions.

Protection

Have an Emergency Fund

I generally recommend having 3-6 months’ worth of living expenses saved into a readily accessible fund.

Factors which increase the number of months include:

  • a single income source,

  • variable compensation,

  • real estate investments, etc.

An emergency fund is readily available at its full value.

That can be investments, right? After all, stocks can be sold almost immediately.

No!

Although stocks can be sold quickly, markets can move even faster. Almost every day, at least one company’s stock price is cut in half or falls to zero.

Whole markets can drop substantially in a day. For instance, the Dow Jones Industrial Average dropped 22.6% on Black Monday on October 19, 1987.

Cash equivalents are liquid. The emergency fund doesn’t need to be in physical cash. A savings or money market account works well.

Silver metal case with stacks of hundred dollar bills in rubber bands. Some of the bills are lying around on a black table outside the case.

Stay Appropriately Insured

Unfortunately, I’m not aware of any insurance companies which operate as a not for profit. It’s in the best interest of regulators to ensure insurance companies earn a profit so they can pay claims!

Premiums received have to exceed payouts. On average, the house wins.

Unfortunately, we can’t predict our individual needs for potentially devastating expenses like:

  • car accidents,

  • medical care,

  • disability, and

  • death

Insurance protects against catastrophic loss. Underinsurance might sink someone’s finances faster than anything else.

That said, it’s important to only insure for what’s needed. Ways to reduce insurance expenses include:

  • increasing deductibles and

  • dropping coverage for manageable expenses.

The higher someone’s wealth, the less coverage they might need for things like:

  • disability,

  • life insurance, and

  • long-term care.

However, it’s imperative someone have adequate coverage until they become fully financially independent.

Nonetheless, reducing insurance costs with wealth can be a virtuous cycle for many types of insurance:

Underwater image with the sun beating down in the middle. Title at the top in white: Virtuous Cycle. Curved arrows go around the bright sun: LESS NEED to LOWER COST to MORE SAVED to LESS NEED. The three arrow sections are in a white marker font.

Not all insurance premiums fall with rising wealth. Liability and umbrella insurance needs - and therefore cost - tend to rise. Home and auto also rise with higher value

Shop Around

Unlike with credit, there isn’t a score which is negatively impacted by getting competing insurance quotes.

The biggest cost of shopping for a lower premium is time.

If an insurance provider:

  • offers the same or better insurance coverage

  • at the same premium

  • and has the same or better financial footing,

it’s likely a better deal.

The insurance coverage must be truly comparable. Comparing terms is hopefully straight-forward.

However, it can be tougher to evaluate things like:

  • claims speed,

  • likelihood of payment, and

  • customer service quality.

A single shopping cart in a grocery store aisle. A pink caption below it says "Shop around for insurance"

Be Kind

Kindness is not just the right thing to do. It also reduces the likelihood of being sued.

According to The New York Times:

… physicians sued less often are those more likely to spend time educating patients about their care, more likely to use humor and laugh with their patients and more likely to get their patients to to talk and express their opinions.

The greatest predictor isn’t:

  • where they studied medicine,

  • years of experience,

  • or even skill.

It’s bedside manners!

Accidents happen in all walks of life. However, people treated poorly are less likely to forgive and more likely to sue for damages.

Kind, honest, and clear communication can help reduce the risk of a lawsuit. Always be a little nicer than needed.

Physician in a white lab coat in a hospital with arms crossed. The head is replaced with a yellow smiley face.

Goals

Plan Well Ahead

It’s important to plan ahead for expenses. It’s even more important to plan ahead for life.

If you don’t know where you’re going, any road will get you there.

Having a clear goal simplifies thousands of decisions. What might otherwise be murky tradeoff decisions become clear.

Develop Systems

James Clear - the author of Atomic Habits - says:

You do not rise to the level of your goals.
You fall to the level of your systems.

Examples of how systems can improve financial outcomes include:

  • creating repeatable work processes,

  • automating bill payment & saving, and

  • developing a method to identify & invest excess cash.

Image of two metal gears in a pink lights.

Support Others

What makes humans special is our ability to help each other. Compensation is the result of helping others.

Helping others is also key for personal relationships. The right time to meet your neighbors isn’t when your house is on fire!

If you’d prefer to think in terms of dollars and cents, consider the following. Over the long-term:

Value added = # people helped * amount of help per person

Value added = goodwill + compensation

Goodwill attracts more people to help!

Green background. Compensation System yellow title. # People Helped X Amount of Help each has an arrow pointing to Value Added in yellow. Two arrows from Value Added point to Goodwill and $ Earned. There's an arrow from Goodwill to # People Helped.

Want to earn more consistently higher income?

  1. Help more people,

  2. Help people more thoroughly, or

  3. Both.

Be Ready

Life’s like surfing.

  • You don’t know when a great wave will come along

  • When it does, you need to jump on it right away

  • You have some influence - yet never full control - of where you go

  • All good things come to an end

The image below is… not me! 🤣

Image of what appears to be a man bodyboarding on a wave in the ocean.

If you’re interested in making the most of your financial opportunities…

Disclaimer

In addition to the usual disclaimers, neither this post nor this image includes any financial, tax, or legal advice.

Kevin Estes | Founder | Scaled Finance

Kevin Estes is a financial planner helping T-Mobile employees and their families live their best lives.

He worked in T-Mobile Financial Planning & Analysis for nine years and has extensive experience with T-Mobile’s compensation and benefits package. He received a certificate in financial planning from Boston University, passed the CERTIFIED FINANCIAL PLANNER™ exam, and founded Scaled Financed in 2022.

About | LinkedIn | Contact

https://www.scaledfinance.com/
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Hierarchy of Expenses

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Benefit from Inertia