The Pyramid of Wealth Building

Building Wealth

I am honored to have a great guest post by newcomer to the Personal Finance Blogging scene: Compounding Works. At Compounding Works, they believe the best investment is in learning, and by compounding it, we will achieve much better financial results.

Using the Pyramid of Wealth Building

The first step to building wealth is to… well, start saving. The savings ladder is a great guide to help you get started. Setting up a budget and save regularly is key to succeed in the long run.

Saving encourages good habits, and protects your future self from both unforeseeable events and planned expenses, such as a wedding, buying a house or retire early.

But just saving isn’t enough, though. If inflation, or the rate at which prices increase over time, continues to rise, your money will loose its value over time, unless you can make it grow faster than inflation rises.

This is where investment comes in. It doesn’t matter if you have $10, $1000, $10,000 or $1,000,000 saved away. If you don’t invest that cash wisely, it will shrink as time goes by and become less valuable.

So how can we invest our cash?

 

Investing our way to wealth

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Frugal-Not-By-Choice

Making your own Soap

Being Frugal-not-by choice

My Inspiration for This Post

This week on Twitter I let off a little rant. (I hope you are following me!)

I saw that there were some personal finance bloggers making fun of a frugal tip: a video showing how to make your own dish washing soap to save costs.

The point that they were making: Its stupid to spend time trying to save a few dollars on dish washing soap. The return on these types of hacks is small and negligible.

In a way, they are right. Making your own dish washing soap will not save you more than a few dollars. Those few dollars will not make you rich. It won’t let you retire earlier (which has slowly become the ultimate goal for many bloggers). It gives you very little return for your efforts.

Would you make your own dishwashing soap to save money?

This is all true but missing a very key point. There are some people who actively choose to live frugally. They are frugal-by-choice. But there are very many people out there who aren’t lucky enough to have a choice. They are being frugal-not-by-choice. The difference between the two is vast.

Frugal-by-choice versus Frugal-not-by-choice

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