Implementing Wealth Protocols
Wealth gives you options. You can act fast and take advantage of opportunities. You can deploy your resources strategically to maximize how much money you’re making (and reduce expenses, too).
Wealth extends you speed and range.
That means building your wealth is a paramount objective. You are literally giving yourself and your loved ones a bigger and safer life.
Earlier this month we discussed the 10 Rules to Wealth. In that piece I hammered home the importance of activating multiple income sources, leveraging them together to increase wealth building rates and watching your expenses like a bionic hawk.
Rules are so important that I believe in taking them a step further by building systems to help me adhere to these rules. In this context, rules become protocols.
Let’s look at my wealth protocols and then we’ll talk through implementation.
The Seven Wealth Protocols
The Surplus Maximization Protocol: Consistently spend less than you earn, prioritizing savings and investments. Resist the urge to engage in excessive consumerism or lifestyle inflation.
The Prioritization Protocol: Automate savings and investment contributions to ensure consistent progress toward your financial goals.
The Consistent Growth Protocol: Invest regularly in a portfolio of income producing and capital appreciating assets, harnessing the power of compounding.
The Diversification Protocol: Spread investments across various asset classes to mitigate risk and enhance potential returns.
The Income Amplification Protocol: Actively pursue opportunities to increase your income through career advancement, skill development, or entrepreneurship.
The Debt Minimization Protocol: Avoid high-interest debt and prioritize its elimination to preserve financial resources.
The Tax Efficiency Protocol: Employ strategic tax planning to minimize your tax burden and optimize your financial resources.
By adhering to these Wealth Protocols, you can navigate the complexities of personal finance with confidence and purpose, building a solid foundation for lasting financial well-being.
Now let’s talk about how you implement these from a tactical and strategic perspective.
The Seven Wealth Building Protocols: Implementation Guide
1. The Surplus Maximization Protocol
You must keep your money and use it as fertilizer to grow more money. This means studying your spending and taking steps to curtail it.
Track Your Spending: Utilize budgeting apps or spreadsheets to monitor your income and expenses. Identify areas where you can cut back and redirect funds towards savings and investments.
Embrace Frugal Living: Prioritize needs over wants and resist impulse purchases. Seek out cost-effective alternatives and explore DIY options whenever possible.
Avoid Lifestyle Inflation: Resist the temptation to increase your spending as your income grows. Maintain a modest lifestyle and prioritize long-term financial goals.
Whenever I start spending 3 figures per month on something, I evaluate alternatives.
Whenever I start spending 4 figures per month on something, I evaluate investment and partnership options.
By doing this I am constantly engaged in industry research + outreach with industry leaders from all sectors (software, data, financial services, hospitality, etc..) which yields me opportunities. I learn ways to cut costs. I learn about substitutions I can make. I sometimes even invest and/or partner with these leaders to activate a new income source and reduce my monthly OPEX.
This protocol is listed first for a reason. It is the master key to the rest of the protocols.
2. The Prioritization Protocol
Your expenses (rent, insurance, utilities) are coming for you no matter what.
How many paychecks or other forms of income distribution can you expect this month?
Bottom Line: you need to invert the dynamics in your checking account by activating more income sources + automated transfers to your savings and investment accounts.
Automate Your Savings: Set up automatic transfers to your savings and investment accounts each month. Treat these contributions as non-negotiable expenses.
Pay Yourself First: Prioritize saving and investing before allocating funds for discretionary spending. This ensures consistent progress toward your financial goals.
Increase Contributions Gradually: As your income increases, gradually increase your savings and investment contributions to accelerate your wealth-building efforts.
By taking these steps you will see:
constantly growing savings account
near-constantly growing investment account (down months still happen!)
larger and larger distribution checks from your various wealth engines
When you lockdown your spending and then use that surplus financial energy to power on new wealth engines… you begin to create a virtuous loop in your bank account.
3. The Consistent Growth Protocol
You can consistently gain energy into your wealth system.. or you can watch it consistently surrender momentum.
Consistency can become your greatest ally if you constantly reinvest while reevaluating your investments for additional opportunities (and risks).
Start Early and Invest Regularly: The earlier you start investing, the more time your money has to grow through compounding. Make regular contributions to your investment accounts, even if it's a small amount.
Choose the Right Investments: Select investments that align with your risk tolerance and financial goals.
Reinvest Your Dividends: Reinvest dividends and capital gains to further accelerate the growth of your investments.
This consistency drives the power of compounding into your wealth system.
4. The Diversification Protocol
Fiat is in trouble. Headline risk is widespread in Europe and Asia. Diversifying financial energy into hard assets like Bitcoin and Gold during times of turbulence has been rewarded historically.
Spread Your Investments: Don't put all your eggs in one basket. Diversify your portfolio across different asset classes, industries, and geographic regions.
Rebalance Regularly: Periodically review your portfolio and rebalance it to maintain your desired asset allocation.
Never bet everything on anything.
5. The Income Amplification Protocol
If your wealth engine can make $100 per month, you can add mass, efficiency (or both) to improve the return profile of it. If you’ve got 5 different wealth engines active you have a great deal of surface area to drive improvements.
Invest in Your Skills: Pursue additional education, certifications, or training to increase your earning potential.
Seek Career Advancement: Actively pursue promotions or new job opportunities that offer higher salaries and benefits.
Explore Side Hustles: Consider starting a side business or freelancing to generate additional income.
Add Horsepower: Invest more capital into your best performing engines to increase income.
Once the engines are up and running the real fun begins. Optimization is life.
6. The Debt Minimization Protocol
Speaking of optimization, debt is a perfect place to focus your energy once you nail the 5 core protocols above.
High-interest debt erodes returns and increases your risk significantly. Paying down these debts will often outperform any available investment allocation you can make.
Avoid High-Interest Debt: Be mindful of credit card usage and avoid accumulating high-interest debt.
Prioritize Debt Repayment: Develop a debt repayment plan and focus on paying off high-interest debt first.
Build a Strong Credit Score: Maintain a good credit score to qualify for lower interest rates on future loans.
But don’t swear of debt completely.
Tactically taking on debt with a cost you can afford and a risk profile you can understand can be a powerful form of leverage. You can control millions in currency contracts for just thousands of dollars. You can buy 5 buildings using the capital required to buy 1. If these engines perform well, this leverage magnifies the return.
I don’t borrow for these circumstances, however. I will use debt to fund marketing expenses after I’ve made an initial equity investment into a business. This way the company takes repayment risk with me, and the loan gets paid back to me which has a much better tax treatment vs income.
Repayment of a loan isn’t taxed at all - it isn’t income.
7. The Tax Efficiency Protocol
This is all about how you get paid. Where the work is performed, how payment is structured and dozens of other dimensions that influence tax efficiency.
Maximize Tax Deductions and Credits: Take advantage of available tax deductions and credits to reduce your tax liability.
Consider Tax-Advantaged Accounts: Utilize tax-advantaged accounts like 401(k)s and IRAs to defer or reduce taxes on your investments.
Rather than risk missed opportunities I prefer to pay CPAs and professional service organizations to work on my R&D tax credits + all other efforts at tax efficiency.
By working intelligently to optimize your income profile you are able to channel more of your energy into your wealth system.
Wealth building is an ongoing process that requires commitment, discipline, and adaptability. Systems help us ensure we are abiding by these protocols and delivering on the discipline, consistency and efficiency required to succeed at building wealth. These protocols underpin my wealth system and I hope you leverage them for your own success as well.
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