Live off of no more than 70% of your income if possible.
The other 30% should be split as follows.
- 10% For Charity
- 10% For Savings and Passive Investment
- 10% Active Investment
This is the basic foundation for building wealth.
Give 10% to those in need.
You have to start being generous when you don’t have a lot.
If you build the habit early, it will stick with you when you become successful. One of nature’s laws is “Give and you will be given to you.” If you give intelligently, you are bettering your community.
Invest in the area you live.
Save 10% in steady, compounding investments.
Pay yourself.
You should do this after you have paid off any debt, especially high interest, and created an emergency fund. I recommend dollar cost average into the stock market. This is the slow but surefire way to build wealth.
This 10% may eventually become your retirement or an inheritance for your family.
Actively try to grow 10%.
Take 10% of your income and try to grow it yourself.
Start a business or buy one. Invest in real estate. Take a course to improve your earning potential. Pick some way to multiply this third 10%. It could even be hiring someone to make a website or app for you.
Don’t be afraid of failing a few times trying to multiply this portion.
Bonus: It’s ok to start smaller.
If you are really stretched, start with 1%, 1%, and 1%.
Then look for ways to increase your income so you can increase those percentages. Do a quick pass over your expenses and cut anything you aren’t using or that is dumb. But it is easier to expand your income than to shrink your expenses.
You can get some more ancient wisdom regarding wealth from a great little book called “The Richest Man in Bablyon.”