Building Wealth: Like Baking a Pie

What does wealth look like to you?

Let’s use a baking analogy. Building wealth is like baking a pie. You need to put in work and preparation, and you need time, patience and dedication.

Baking requires key ingredients for your dough to rise. Baking requires proper measurements, taking the right steps and knowing what kind of delectable pastry you want to rise from your efforts.

The definition of wealth is subjective. Your dreams are yours…it’s highly customizable according to what you want, depending on your preference. What is your desired size? Whether financial wealth means ‘10 million’ or ‘100 million to you’, that’s for you to define the parameters.

What does financial freedom look like for you? Whatever the size or specs, the wealth pie should have the following components:

1. Zero Debt

Financial freedom means zero or minimal debt. This goes without saying, minimal debt (housing mortgage) or best scenario-zero debt at all. Eliminate bad debt completely–especially on high interest credit cards.

2. Savings for Threats

Right amount of savings for threats; a.k.a.: emergency fund. Emergency funds cover for the unexpected: a safety net to cover for unforeseen circumstances: medical emergencies, unemployment, calamities, epidemics (such as the latest COVID-19 pandemic), etc.

3. Funds for Future

Right amount of savings for your future; funds separate from your emergency fund. Make different nest eggs for your retirement, for your kids’ education, for long travel, etc. 

4. Liquidity for Opportunities

Right amount of liquidity for opportunities. Just like in corporate finance, having too much cash lying around can be a bad thing–it means you are not allocating your assets right and you’re not investing them enough.

Having the optimal amount of liquidity is key so in case there’s a really good investment opportunity presents itself, you don’t want to be illiquid to get that deal. (P.S., it’s never pawn or mortgage something for an, air quotes, “once-in-a-lifetime deal”)

5. Multiple Income Streams

If you’re serious about getting rich, you need to build multiple streams of income. Have a side-hustle. Take a part-time job. Or start a home-based business. Build a brand and sell products online. Monetize through your blog, Youtube or podcast. Do research on how other people were able to do it.

6. Passive Income

Wealthy people love passive income (or royalty income), because you get paid for little to no work. Passive income is key to generating wealth over time because you don’t need to lift a finger. Examples of income include royalty income from books you’ve written, blog ads, selling digital products like courses and workshops; Dividends you receive from stocks; Rental income from apartments or properties you own, etc.

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Investing and Earning: Philippine Investment and Earning Opportunities during the COVID pandemic and other future crises with Dagohoy Academy and — This episode is sponsored by · Anchor: The easiest way to make a podcast. Support this podcast:
  1. Investing and Earning During a Crisis
  2. Reopen Business in the Philippines in the New Normal
  3. Find your WHY: The Quest to Finding your Purpose
  4. Professional SMART Goal Setting
  5. Building Wealth: Think of it like Baking a Pie

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