What Are the 6 Principles of Wealth-Building?

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I’m baffled by how surprisingly simple it is to build wealth. It’s so simple, in fact, that I’m equally surprised that more people don’t talk about wealth-building or choose it as an aspiration. But I’ve found that building wealth really comes down to six main principles. And here they are.

The 6 Principles of Wealth-Building

1. Have a wealth-building mindset.

   This one might not seem to be that important on the surface. But don’t underestimate the importance of mindset when it comes to building wealth.
   
   It’s not enough to take the same actions that wealthy people take. You have to make sure your mindset is set on creating wealth for yourself. Because if it’s not, it’s very unlikely you’ll be willing to do what’s necessary to actually build wealth. This is something I learned from the book Secrets of the Millionaire Mind by T. Harv Eker. More than anything, it’s their mindset that sets apart the wealthy from the not-so-wealthy.

2. Live below your means.

   Building wealth isn’t really about having a huge salary—although that can help you if you use your money wisely. But even on a modest salary, if you live below your means, you can become wealthy over time.
   
   Living below your means doesn’t mean you have to deprive yourself of every pleasure. But it does mean you have to be aware of how much money you have coming in and how much you have going out. I know it might sound overly simplistic to say this, but to live below your means, the amount coming in should be greater than the amount going out.
   
   You don’t necessarily have to stick to a budget if you find that too restrictive. But if you find you have a tendency to want to spend everything you make—or even more than you make—you might want to consider a budgeting principle that allows you to enjoy your money while having enough to pay for necessities and save and invest (see #3). The 50/30/20 rule is an example. It basically says that you reserve 50% of your after-tax income for needs, 30% for wants, and 20% for saving and investing.
   
   If you find yourself succumbing to lifestyle inflation, which is when you increase your spending as your income increases—or if you think you might be tempted to—you definitely might want to consider sticking to a budget. And as your income increases, consider not upgrading your lifestyle right away.
   
   For example, instead of opting for the new car or more expensive house as soon as you get a bonus at work or add another source of income to what you make, wait until you can comfortably afford those things. You might be surprised at how frugal wealthy people can be.

3. Save and invest.

   This is where real wealth is built. Although I can’t give you guidance on how to do this effectively (that’s what a financial advisor is for), I can tell you that the more you save and invest, the faster your wealth will grow.
   
   But when it comes to saving your money, you might want to make sure that it’s still growing on its own, like by putting some in a high-yield savings account so that it’s earning interest. You don’t want to have most of it just lying around somewhere, not doing anything for you.
   
   As for investing, there are a seemingly infinite number of ways you can invest your money. You can invest in more traditional ways, like with stocks and real estate. And you can invest in nontraditional ways, like with cryptocurrency and businesses—or even starting a profitable business of your own. And don’t forget that the best and most important investment is the one you make in yourself.

4. Minimize debt and expenses.

   This is a principle that can help you with living below your means tremendously (see #2). As much as possible, you want to avoid excessive debt and unnecessary expenses.
   
   You definitely want to pay your credit card bill on time—but make sure you’re paying the statement balance, not the current balance. (Just so you know, your credit score can drop if you pay the current balance.) And you want to prioritize paying off other debts.
   
   You also might want to limit things like eating out frequently and taking extravagant vacations unless you can comfortably afford those things. If you have a budget that allows you to have your stuff you splurge on, you shouldn’t have to feel guilty about enjoying your money, like by buying yourself a nice outfit for an event.
   
   But you should also have it in your budget to use some of your income to pay your debts back. Even a little at a time can be helpful.

5. Increase your income.

   If you find that the income you have now isn’t enough for you to pay your bills, enjoy your money, and be able to save and invest what you would like to, you might want to consider increasing your income. While this could come in the form of things like getting a raise at work or taking on another job, there are actually innumerable ways to increase your income.
   
   One income source you definitely want to consider is passive income. This is the kind of money that comes to you even while you sleep. This is in contrast to active income, which is income you actively work for—otherwise known as trading dollars for hours.
   
   Passive income comes in many forms, like sales from ebooks and online courses you create or dividends from stocks. And some passive income sources take more upfront work than others before they start generating you real money. (Don’t let the name fool you. Passive income may come in passively, but sometimes you do have to do hard work upfront.)
   
   Even so, you want to try to include this kind of income because it’s difficult to become wealthy without it. This is because you’re always going to be limited in the amount of money you can actively earn because you can only work so many hours in a day. Passive income doesn’t have this restriction.
   
   And even if you can comfortably enjoy your lifestyle with the income you currently receive, you still might want to consider adding other income sources to what you have coming in. It’s better not to be reliant on only one source of income in case that one source goes away.
   
   Plus, the more income you have coming in, the more you have to save and invest. And as I said in #3, the more you have to save and invest, the faster you can build your wealth.

6. Become financially literate.

   This essentially means that you understand how money works. To become wealthy, it’s helpful to know how to make money, how to make your money work for you, and how to use it wisely once you have it.
   
   However you choose to become financially literate is up to you. You can read books and articles, take courses or classes, attend seminars, or do a combination of things. But it’s good to take an active role in your own financial education. This is how you’ll learn things like what budgeting principles work best for you and what investments and passive income sources you want to explore.
   
   While you might also want to consider working with a financial advisor to figure out how to best manage your money, there’s no replacement for being able to talk intelligently about money and for understanding how it works.

Final Thoughts

Becoming wealthy really comes down to managing your money well and having it work for you. I think one of the reasons more people don’t try to build their wealth is because they see it as this impossible dream only a few can achieve.

Most people aren’t raised in an atmosphere where wealth-building is openly discussed. And they may also have limiting beliefs about their ability to create wealth for themselves. But I believe that if more people understood just how simple wealth-building is, they might actually consider making it one of their aspirations.

~ Ashley C.

Note: The advice presented here is for informational purposes only. If you’re in need of professional financial advice, please see a qualified professional.

Last updated: January 24, 2025