The 4 Keys To Building Wealth


The 4 Keys To Building Financial Wealth

I don’t know where I first heard the quote shown above, but I’ve cited it many times over the past 30 years.  The keys to building wealth are simple, and the quote above is true.  However, I realized that the quote is not entirely correct.  It’s not “Easy” to build wealth, but it is “Simple” (or, straightforward).  We’ll build on that theme today, with statistical evidence that demonstrates the truth behind the statement.

I came across several articles this week that build on the original quote included at the topic of this article.  Having done some research, I think the quote is enhanced by the addition of “invest the difference wisely”.  Here, then, is how I’d summarize the statement today:

Spend Less Than You Make, Invest The Difference Wisely, & Do It For A Long Time. Click To Tweet

I came across a PNC Wealth Management Survey in which 493 millionaires were surveyed regarding the key decisions which lead to their wealth.  The summary of their responses are below:


Todd Tressidor at FinancialMentor built on the theme with this article, which summarizes the keys to building wealth into two sentences:

  1. Make more than you spend and invest the difference wisely.
  2. Develop simple daily habits that result in wealth accumulation.

Using these two sources as background, I’ve summarized the 4 Keys To Building Wealth As Follows.

The 4 Keys To Building Financial Wealth

1. Spend Less Than You Earn


38% of millionnaires cite “controlling spending” as one of the keys to their wealth.  This is a fundamental “First Step” in building your wealth.  Regardless of your how much you make, develop the habits of spending less than you earn.   If you make $50k, pretend you only make $40k and invest the $10k difference (a 20% savings rate.  Tough, but you can achieve it in time).  Automate your savings, so that it comes out of your paycheck before you see it.  Increase your savings rate every time you get a raise.  Don’t make the mistake of looking at things from the perspective of “Yeah, I can afford that monthly payment”.  Rather, save cash until you have enough set aside to buy that car, and then only buy the car you can afford with the cash you’ve saved.

Be very, very careful with your spending, it’s one of the keys to financial wealth.  The first priority should be to develop a “positive cash flow” in your personal situation, then work with that positive cash flow to build wealth.

It’s also important that you do this from the earliest possible age.  I suspect many of you reading this are well into your careers.  Pass it along to your children or grandchildren, while they still have time to Start Early.  There’s a reason Albert Einstein called compounding The Most Powerful Force In The Universe.  Let compounding work for you.  Do It For A Long Time. 

2. Save The Difference


Once you’ve developed the habit of spending less than you’ve earned, it’s important to get in the habit of saving the difference.  In my life, I’ve found the easiest way to do this is to automate your savings.  My daughter just started her first “real job” a few months ago, which I wrote about in “The First 6 Steps To Financial Wealth”.  As mentioned in that article, we worked with her to set up automated savings into both a Vanguard Roth retirement account and a CapitalOne savings account before she even saw her first paycheck.  It’s important to get these details right early, and we’re working hard to instill the right habits in the life of our daughter as she starts her career.

Daily habits are more important than they may initially seem, and I give Todd Tressidor credit for pointing that out as one of his two sentences of the formula to create wealth:  “Develop simple daily habits that result in wealth accumulation”.  We all live life one day at a time, and those simple daily habits of controlling our spending and saving the difference are what result in wealth creation over time.

 3. Maximize Your Earnings


The principle behind these 4 Keys To Building Wealth is simple math.  You need to spend less than you earn.  The bigger you can make the gap between earning and spending, the more quickly you’ll build financial wealth. If you don’t earn very much, you’re forced to focus on frugality as the only way to widen the gap.

A more powerful way to widen the gap is to focus on increasing your earnings.

If you’re not satisfied with your current earnings, do some honest self-evaluation.  Are there things you could do which would increase your value in the marketplace?  A landscaper who can only provide physical labor will not have the same earnings potential as a landscape designer who can work with a homeowner to build a personal landscape design.  A factory worker who doesn’t understand business principles limits her opportunity to be promoted to “the front office”.  Think about ways that you can increase your value to your employer.  Take responsibility rather than looking for ways to assign blame.

Another option is to consider developing a “side hustle” for supplemental income.  The options are almost limitless in today’s technology driven age.  I have a friend who has built an Ebay store with his wife.  They hit the big sales at retail stores, work the yard sales and auctions, and then resell the items on Ebay for a higher price than they paid.  I just Googled “Side hustle jobs” and came up with the following:


1.7 MILLION “Side Hustle” Results!  Not happy with your income?  No one to blame but yourself.  Get hustling!

As your earnings increase, avoid lifestyle inflation.  Avoid the temptation to spend the extra income.  If you work diligently at keeping your spending at the same level, your “gap” will naturally widen as your income increases, and your wealth accumulation will accelerate.

Sure, it’s hard to maximize your earnings.  It takes time and effort to set up a side hustle.  It takes work to find a way to enhance your education/qualifications while you’re working full time.  However, hard work is the #1 influence cited by millionaires in the PNC Survey…..


If you’re serious about wanting to build financial wealth, be prepared to invest some hard work into the process.

4. Invest Wisely


As you develop positive cash flow, focus initially on using “the gap” to build an Emergency Reserve.  Once you’ve built up savings equal to 30 days of your typical spending, you can work toward building your investment portfolio.

I’m a big fan of low cost mutual funds, and have no reason to suggest anything different for you.  I wrote about various asset classes here, and would encourage you to read that article for my thoughts on how to “Invest Wisely”. If you’re interested in the simplest approach to investment management I’ve ever seen, have a look at The Simple Path To Wealth, and follow the model portfolio presented in the book.

Apply These 4 Keys To Build Your Financial Wealth. It's Simple. Click To Tweet


Thinking back to my opening quote, I’ve realized that “Simple” is a better description than “Easy”.  Buildling wealth is simple, but it isn’t necessarily easy.  It takes good habits day after day, week after week, year after year.  Regardless, the reality is that the path to financial wealth is straightforward;

Spend Less Than You Make, Invest The Difference Wisely, And Do It For A Long Time.

The four keys presented above are “timeless wisdom”, and have been taught for thousands of years.  They work, and they’re simple (if not easy).  The hard part is self-discipline.  It’s your responsibility to manage these four keys in your life.  For a secure retirement, it’s critical to understand the keys to building wealth.  More important than simply understanding, it’s critical that you apply them in your personal life.

How many of the four keys to building wealth have you discovered and put to use?  Focus on the one key which you feel you’re most lacking, and work on improving that area of your financial life over the coming weeks. I’d love to hear how you’re applying these keys to building wealth in your own life.  Are there other keys which you’ve discovered?  Please share your ideas and your learnings.  Together, we can achieve this blog’s goal of:

Helping People Achieve A Great Retirement. 


  1. Fritz – You’re right that this is simple and it is easy to understand, but unfortunately human nature makes it tough for most of us to follow these steps consistently for a long time. I hope that as more people read about others that are doing it successfully they will see the long term benefits and stick with it also.

    1. “Human nature makes it tough…” Man, how true is that! We have to overcome our nature, and keep the long term in perspective. It IS hard for most folks, and many don’t realize they’ve made the wrong call until it’s too late to really change things. Hence, they work. And work. Some, like you, keep the long term in perspective, and are able to retire early as a result! BTW, how’s your retirement going? I’d love another guest post from you, anytime! Thx for your note.

  2. It sounds easy, it isn’t.

    Spend less than you earn with the Joneses as neighbours? Finding a side hustle sounds easy, yet i have to find one that does not derails my work life balance I want to maintain. Invest wisely? you mean, go for the short term gain based on the media?

    All in all I agree: it is simple.It requires some disciple a plan and a clear view on what you want to sacrifice now for a better future.

  3. It’s very simple, but not easy. We have a consensus! Not living near too many people we know has certainly kept us away from the Joneses. When we move near Mr. Groovy’s family we need to set budget boundaries because there’s a lot of restaurant dining going on there!

    The biggest takeaway for me is the automatic part. You can’t miss what you never see.

    Great post as usual Fritz!

    1. Thanks, Mrs G! You’ve obviously done well, as you’re now less than 2 weeks from RETIREMENT! Happy for you and Mr G! Look forward to hearing about the transition! (And, sorry about Joe!).

  4. It’s the simplest concepts that are the toughest to master. Everyone hears save more than you spend but looking at how much America is in debt you can see not many of us follow these rules. Peer pressure to keep up with those around you ever abundant and all too often we read about those that go against the grain receiving negative comments for being too extreme. I was at lunch the other day and a friend said when are you going to upgrade your iPhone. It’s only two years old. It works great. In this case I’ll save and hopefully stay out of debt 🙂

  5. Good list and you nail what I consider the primary component in building wealth, time and compound interest, in the first key, ‘Spend Less Than You Earn.’ The importance can’t be overstated. While it’s good if someone follows these four key practices at any point in life (40, 45, 50 or even later) but it is so much better if they adopt these practices earlier, say in their 20s.

    1. James, I always appreciate your insight. Clearly, the earlier, the better. I really hope folks send articles like this to their kids/grandkids to get the message to those who most need to hear! Thanks for your input, as always!

  6. I retired eight months ago at 60 with more invested and saved than I will ever spend and did it exactly the way you detailed. My brilliant and frugal wife and myself always spent significantly less than we earned, we invested the difference and never borrowed money for anything except for a very modest house we paid off early. Never ran a credit card balance, ever. We bought inexpensive cars with cash and kept them until they were worn out. I worked hard to maximize my income and by the time I retired I was amazed the company was willing to pay me so much. We instilled good study habits in our kids and they paid their own way through college with free ride academic scholarships, no loans. They all earned secondary degrees on their own nickel working for the universities they attended and now they are self sufficient and making good wages living in their own places, not in my basement. I have four part time gigs I work at for fun and still earn more money than I can spend with four day weekends every week. Life is good, and it can be good for anyone who takes your very sound advice.

  7. I think the biggest obstacle people face is the marketing industry. For perhaps a century now, our best and brightest Mad Men have relentlessly pushed the notion that there’s a perfectly positive relationship between spending and happiness. If you want to be happier, buy more fancy stuff. But simple reflection proves this notion false. I doubt cruising down the highway in a new BMW cranking out ABBA will make me any more happy than when I do it now in my 12-year-old Camry. But until people realize that frugality (i.e., modest living) is not synonymous with want and misery, the act of spending less than you earn will indeed be hard. Sigh.

    Great post as always, Fritz. I especially like the warning to be wary of the I-can-afford-that-monthly-payment trap. That trap sucked me in during my 20s and 30s. If young people could be mindful of that one pitfall, they would be well on their way to mastering their finances.

    1. Thanks for your input, (soon to be retired) Mr. Groovy! ABBA? Come on, I figured the Groovy’s as Grateful Dead fans! Groove on, baby!

  8. Great read. Very true and to the point. I am 29 now and I started saving seriously when I was 27. (or what i thought was seriously) I have taken my saving to a whole new level in the last 6 months. I currently have amassed a little over 30k. 10k of that is from the last 5 months alone. My new current “automated” allocations almost max out my company Roth 401k (putting away about 16.5k year) and I always max out my Roth IRA with my bank as well. All in all, not including tax returns. I am putting away 22k yearly with a 59k a year salary. The last 5 months have proven that I am able to not only sustain what I used to believe was (frugal living), but that this plan will work for the long term as well. I am glad I learned this life lesson early from reading great post like this. I hope that more people start to see the bigger picture at a younger age. Keep em coming!

    1. Military – awesome comment. I can tell you one thing: you are absolutely on the right track with that awesome savings rate, and years ahead of most of your peers. Enjoy like, but live it frugally. You’ll do well. Keep in touch, I’d like to hear how things progress. Thx for your comment, and for showing people it can be done!

  9. Investing is simple but it’s not easy.

    Well I feel anything worth having in life ain’t easy at all. If you are willing to work hard, you’ll definitely get rewarded. This is a great post to let people know what they should be looking for. Great work Fritz!

  10. Perhaps another point to accelerate wealth building is to buy assets instead of liabilities? I see a lot of young kids with no home, but driving new cars, shopping for brand name clothes, taking expensive trips, and eating at high-end restaurants.

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