Building wealth is less about luck and more about disciplined principles applied consistently over time. Below are ten foundational principles, each with practical examples to help guide your financial journey.
- Increase Earning Power
Invest in yourself through ongoing education and specialization in your field.
Example: An engineer who earns additional certifications may qualify for higher-paying roles, increasing long-term income.
- Carry Some Cash
Maintain an emergency fund of 6–12 months of household expenses. Keep cash in your portfolio to hedge downturns, seize opportunities, and stay disciplined.
Example: During a market dip, an investor with available cash can buy quality stocks at discounted prices.
- Keep Debt Low
Strive for a low debt-to-equity ratio and aim to retire debt-free.
Example: A family that pays off their mortgage early frees up thousands in monthly cash flow for savings and investments.
- Avoid Consumer Debt
Say no to impulse spending and ensure your household maintains a positive cash flow.
Example: Avoid financing a new car unnecessarily—opt for a reliable used vehicle and save the difference.
- Invest 15–20% of Earnings
Regularly invest a portion of income using Dollar Cost Averaging in both equity and debt of capital-efficient businesses.
Example: Contributing monthly to an index fund smooths market volatility and builds long-term wealth.
- Reinvest Dividends
Compound returns by reinvesting dividends from industry leaders over decades.
Example: A $10,000 investment in dividend-paying companies can multiply many times over if dividends are reinvested rather than withdrawn.
- Protect Against Catastrophic Loss
Do thorough due diligence, diversify holdings, and maintain exit strategies for risky assets.
Example: A balanced portfolio of stocks, bonds, and real estate reduces the chance of a single market event wiping out wealth.
- Manage Taxes Smartly
Plan to minimize lifetime taxes—pay more when in low brackets, and less when in high ones.
Example: Contributing to a Roth IRA while in a lower tax bracket can provide tax-free income in retirement.
- Own the Right Insurance
Ensure you have the right type and amount of life insurance at the right price—avoid being “insurance-poor.”
Example: A young parent with term life insurance ensures family protection without overpaying for costly permanent policies.
- Stay Disciplined Over Time
Wealth is built over years, not months. Commit to consistency, patience, and adaptability as circumstances change.
Example: A disciplined saver who invests steadily for 30 years often achieves financial independence regardless of market cycles.
These principles are not shortcuts—they are timeless guidelines. Applied consistently, they help individuals and families create resilience, seize opportunities, and ultimately achieve financial independence. Hold it loosely and God bless your efforts, Shaun.
“Give a portion to seven, or even eight, for you know not what disaster may happen on earth.” ~Ecclesiastes 11:2
Disclosures:
The information provided in this blog is for educational purposes only and should not be construed as investment, legal, or tax advice. Investing involves risk, including the potential loss of principal, and past performance is not indicative of future results. Examples provided are hypothetical and for illustrative purposes only; they do not represent actual results and should not be relied upon for making financial decisions.
Old Forge Wealth Management, LLC is a registered investment adviser located in Rhode Island. Registration does not imply any level of skill or training. For advice specific to your personal circumstances, please consult a qualified financial professional.