Let's Build a Simple Wealth System
“Matt you don’t show us any of your systems”
A reader connected with me on X and said he isn’t finding any wealth systems on Wealth Systems. That’s a big problem!
My first instinct was to link to the 5 different series I’ve published, each outlining a different wealth engine:
Wealth Engine #1: Dividends
Wealth Engine #2: Options
Wealth Engine #3: Direct Lending
Wealth Engine #4: Direct Investing
Wealth Engine #5: Digital Products
Some of these series have 5 to 7 individual parts - I provide language and concepts in the first few parts, then we dig into examples of how these engines operate to make money.
The point is that I don’t print out explicit step-by-step instructions for how you should build your wealth system because we all have different goals, different circumstances, much different sets of resources and personal networks, etc… it would be irresponsible for me to proclaim financial advice without truly knowing you and your particulars.
What I can provide are the components and concepts that I use in my own wealth engineering and wealth system building… and then you can leverage them to improve your own wealth motions.
Speaking of, let’s build out a budget reconciliation + savings tracking system so you can keep an eye on your wealth energy.
Building A Budget and Savings Tracking System
Option 1: The Manual Ledger
I love the simplicity and tangible nature of a manual ledger. It allows me to truly engage with my finances on a personal level. To set up this system, I start with a basic notebook or a spreadsheet. At the top of each page, I write the month and year. I then create columns for the date, category, description of the transaction, income, and expenses.
Every time money comes in, I record it in the income column with a brief description, like "Paycheck" or "Birthday gift." For every expense, no matter how small, I note it down in the expense column with a corresponding description, such as "Groceries" or "Coffee." I also use my bank statements to ensure I haven't missed any transactions.
I will dump out the CSV files from each bank, and all cards… then I give them each their own tab in a spreadsheet. Then I roll everything up to the top summary sheet where I can track week-over-week changes by category.
The beauty of this system lies in its simplicity. By physically tracking each transaction, I become acutely aware of where my money is going. This awareness naturally encourages me to be more mindful of my spending habits. The manual ledger also helps me identify patterns in my spending. For instance, I might notice that I tend to overspend on eating out during the weekends. Armed with this knowledge, I can make conscious decisions to curb unnecessary expenses and redirect those funds towards my savings goals.
I keep a running tab of total asset value including savings + how much that amount increased (or decreased) since the last reading.
While it requires discipline and consistency, the manual ledger offers a sense of control and clarity over my finances. It's a powerful tool for building a strong foundation of financial awareness and responsibility.
This is the most basic system, harking back to traditional budgeting.
Specifications:
Tools: A physical ledger, spreadsheet software, or a basic budgeting app.
Process:
Record all income: Every time you receive money, record the date, source, and amount.
Categorize expenses: Keep track of every expense, assigning it to a category (e.g., housing, food, transportation).
Regularly reconcile: Compare your recorded expenses against your bank statements to ensure accuracy.
Analyze spending: Review your categorized expenses to identify areas where you can save.
Set savings goals: Determine a target amount to save each month and track your progress.
Pros: Simple, promotes financial awareness, low cost.
Cons: Time-consuming, prone to human error, limited automation.
Option 2: The Automated Budget
Technology can be a powerful ally in managing my finances.
Going this way leverages the convenience of budgeting apps to automate my savings and budget reconciliation process. Setting it up is a breeze - everything links to your bank accounts and credit cards, even consumer credit and other lines of borrowing (or equity).
Most of these apps automatically imports and categorizes my transactions, saving me a significant amount of time and effort. While the automated categorization is usually accurate, I always review it to make any necessary adjustments. Within the app, I set budget limits for each category, such as housing, transportation, and entertainment. This helps me stay within my predetermined spending limits and avoid overspending.
One of the greatest benefits of this system is the real-time feedback it provides. I can monitor my spending against my budget at any time, from anywhere. This allows me to make informed financial decisions on the go. The app I use also sends me timely alerts when I'm approaching or exceeding my budget limits, acting as a digital conscience that keeps me on track.
This system leverages technology to automate much of the tracking and reconciliation process.
Specifications:
Tools: A budgeting app with bank account syncing capabilities (e.g., Mint, YNAB, Personal Capital).
Process:
Link bank accounts: Connect the app to your checking, savings, and credit card accounts.
Categorize transactions: The app automatically categorizes transactions, but you can adjust them as needed.
Set budget limits: Establish spending limits for each category.
Track progress: Monitor your spending against your budget in real-time.
Receive alerts: Get notifications when you're approaching or exceeding your budget limits.
Utilize planning tools: Many apps offer features for setting financial goals, tracking net worth, and planning for future expenses.
Pros: Automated tracking, real-time feedback, reduced errors, goal-oriented features.
Cons: Requires sharing financial data with third-party apps, potential for overspending if not used diligently, may require a paid subscription.
Once you have laser focus on how much money you were spending, and which channels you were spending your money on, you are able to optimize your wealth building.
Each dollar you can save can be redirected into your wealth engines to generate additional returns.
If you aren’t budgeting, reconciling and tracking your savings growth over time you are welcoming poor wealth building conditions and missing opportunities.
Use systems first to reduce and optimize your spending… that will greatly accelerate your journey.
🥺 Follow our newly launched video channel Hacking Wealth. This video series focuses on the overlap between wealth and technology.
Wealth is the sum of all the value humanity has created while technology is the engine we've used to build wealth over time. The rate of wealth building is accelerating faster and faster thanks to AI, robotics and rapidly rising tide of technology.
👋 Thank you for reading Wealth Systems. I started this in November 2023 to share the systems, technology, and mindsets that I encountered on Wall Street.
💡The BIG IDEA is share practical knowledge that can be applied toward the development and refinement of wealth building systems.
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