In actual fact, there is actually no one formula to wealth. Having said that, most of those who are wealthy are purposeful — except if it is am inherited wealth.
So we begin the journey. However you map it — your income should be split in this manner for as long as you can try; circumstances do change, thus the formula can be tweaked every now and then.
The very first step is to earn an income. Most earn income and squander it away at expenses and mundane things which bring temporary joy. Income if not allocated properly will not achieve its aim. Your income should be used to generate future income.
The rule: Simple but hard to follow. That is what building wealth requires.
The 50–30–20 Rule:
Allocate >
50% — Investment Account
30% — Savings Account**
20% — Others — Expenses
The 30% going to savings should cover your Emergency Fund — High Yield Savings and other liquid cash needs you may have. These can be drawn in case of emergency or other necessities.
Whilst in this new age, hardly can 20% cover expenses in the face of rising costs.
In a more realistic settings, the formula should be tweaked to accomodate your situation.
Ab hinitio, there is truly no one way in building and sustaining wealth but the 50–30–20 rule is one to try or start with. Be pursposeful about it and give it your best shot.
