Everything that exists today was built upon a foundation.
The life you have, rich or poor, is a reflection of the foundation you’ve built over your adult years.
If you’ve worked hard and sacrificed for many years in order to build a foundation that will pay dividends down the road, then you have a strong foundation. Your strong foundation means you will be financially sound and financially independent in your later years, once those dividends start paying off. It also means that you will not be a burden on the ones you love – your children, immediate family and close friends.
If you have done the bare minimum required of you in order to earn an income with very little sacrificing, your foundation will be weak and will not pay any future dividends. Your weak foundation means you will be a burden on your children, immediate family and close friends.
So, how do you go about building a foundation for financial success?
There are really four parts, or four steps, you must take in order to build a strong foundation for financial success:
Step #1 Become a Virtuoso
A virtuoso is someone who sits at the top, as an expert. When you are a virtuoso, the world pays you a premium for your knowledge or skills. It takes some effort and good daily habits to become a virtuoso:
- Purposeful Reading – Focusing your reading to books/articles that expand your knowledge in a specific field. Thirty to sixty minutes a day, every day, is enough to become a virtuoso.
- Purposeful Practice – Practicing specific techniques in various ways in an effort to master that technique. How much time you need to devote to Purposeful Practice depends entirely on what skills you are trying to perfect. For most skills, one to two hours a day will make you a virtuoso.
- Purposeful Study of Facts – Focusing your study to facts that are specific to a topic and focusing on that topic until every fact about it is known. This can be accomplished through Purposeful Reading.
Step #2 Live Below Your Means to Create Excess Income
Keeping your living expenses below your income means you will have excess income. How much excess income you have has a lot to do with how far below your means you are able to live. Those who are able to live off of 80% or less of their net income will have a great deal of excess income.
Step #3 Save and Invest Your Excess Income
Once you have forged the habit of living below your means, you can put your excess income to work by prudently investing it, so that it will grow. This growth compounds every year, meaning your invested savings grows and kicks off interest, dividends and appreciation, which also grows every year. Over time, this compound growth accelerates in later years and can be substantial, facilitating early retirement. Early retirement means freedom.
#4 Create Multiple Streams of Income
Another important brick to lay in building your strong foundation is to create multiple streams of income. The self-made millionaires that I write about in my books did this one revenue stream at a time, often devoting a decade or more to each revenue stream until it began to pay dividends. Once the revenue stream became self-sufficient, they moved on to building the next revenue stream, then the next one, etc. The cash flow generated from these multiple revenue streams can come to the rescue when other sources of income are negatively impacted by economic downturns. Plus, the cash flow generated from multiple revenue streams can be invested, like savings, leading to increased compound growth of your investments.
There are no shortcuts to building a strong foundation for financial success. Hard work, persistence, consistency, patience and good habits are all fundamental to building that foundation. It takes many years to build a strong foundation, but the longer it takes, the stronger the foundation will be.
About Thomas C. Corley
I just have a question regarding the three streams of income you talk about. I noticed that billionaires usually have one major source of income; like Warren Buffett and his Stock Investing, Bill Gates and his Microsoft. Would it be fair to say that the more specialized you are the more money you’re going to make and the more diversified your source of income, the less money your going to make?
Yes. Every stream requires intense focus so that you can gain the knowledge or skills that put you in the “virtuoso” zone. Once you become a virtuoso, and your revenue stream infrastructure is in place, then you can move on to building the next revenue stream. In most cases, subsequent revenue streams are an offshoot of the core revenue stream, meaning there is an overlap of knowledge and skills between streams. This is important because you can leverage that knowledge, those skills, and apply them to subsequent revenue streams.