3 keys to building wealth

The thing I love most about personal finance is that its personal. Everyone faces different situations, experiences and just life in general. Because of that everyone is viewing the world through their own lens that was formed around where they come from and the life they have led.

As I’ve written before, I’ve increased my net worth by a significant amount over the last several years. For the future I have a plan of where I’d like to be but only time will tell how well I’ll be able to stick to that plan. Up to this point I can point to three distinct keys that have gotten me here over the last five years. I wouldn’t be surprised if these keys are different for the next five. Anyway, here are the three keys:

Key #1: Succeed at your job

Both my wife and I are good at our jobs. We work hard, put in the time and have been rewarded by our employers. Keep in mind I am an engineer so did start out with a good starting salary, I have seen steady increases each year due to hard work and a willingness to continue to get better. My wife is very much the same. Her profession is generally well known to not be something that could sustain a household. However, she was the highest paid employee in her company before going part time. Without the high increases in income we wouldn’t be where we are today. The great thing about success in your job is that you are likely setting an income floor for all future jobs.

Key #2: Live off one income

When we first got married my wife and I were roughly 70k in debt and I saw a huge hole to dig out of. My goal was to live off of my income and save 100% of my wife’s income. By and large we’ve done this since we got married. Currently we are at a point where my income covers nearly 100% of our annual living expenses, 401k investments and HSA savings. Her income is going straight into cash, for now. Keep in mind that this key would not be possible without either high incomes or  willingness to significantly sacrifice. Because we do have high incomes I continue to make this a priority for our housefhold.

Key #3: Diligently track expenses

I have tracked nearly all of our transactions in some form or fashion since we got married. From 2011-2013 I did it on a month to month basis and never saved the data. However, starting in 2014 I have used various software programs (more to come on this in the future) to track our monthly income. I am now in the habit of keeping this data for long term analysis. This means I have 3+ years of spending data to draw conclusions from. I use this data to avoid lifestyle creep. Lifestyle creeps sucks and should be avoided at all costs. Without knowing what we are spending I know we wouldn’t be where we are today. The problem is that tracking expenses is boring and never ends. I’m ok with that because I know its a key to where we’ve gotten. I have no plans of stopping tracking.

Well thats it. The beauty of personal finance is that knowing what to do is pretty easy. Its the execution of those steps that is so hard. What do you struggle with? What products, services or accountability tools do you utilize to do the tedious, mundane tasks everyday that it takes to succeed? I’d love to know so that I can get better and so can my readers.

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