I have learned how to build wealth slowly but quite surely through reading popular books and journals on money.

Though all of them recommend numbers of wealth building methods and strategies, most of them aren’t for us.

To set you in the context of my wealth building method and strategy, first let me share my background.

I am from a remote Shemgang. I am married with 2 kids. My parents are farmers. My wife is a housewife. 

The only way to build my wealth is through my monthly salary and bonus savings.

It’s rather a slow and a boring process. But consistent droplets can make even an ocean.

My ultimate goal is to attain the financial independence and then get out of this never-ending treadmill.

Step 1: Earn Regular Income – More will be Good

Income is the base of wealth. Salary is my only regular income. You can do side hustles for more income.

We have to put our skills, talents and qualifications to the best use. The main aim is to earn as much as possible in this step.

But a truth is, all of them are active incomes. This means we are trading our time and skills for income.

It isn’t advisable from a personal finance perspective. However, I do not have a choice at this point of time. 

Step 2: Live Below Your Means – Create Difference

Living below means is ensuring we spend less than what we earn. This is to have a differential amount to save and then to invest.

Personal finance experts will tell this. It makes sense. Unless my earning is so much, from where I can have money to save or invest?

I keep 50% of my take-home salary for needs (rent, groceries, mobile bill, etc), 30% for wants (dining out, movie tickets etc), and save 20%. 

This is the 50/30/20 rule of budgeting. There are many similar rules. You must follow that works well for you. 

Saving 20% is ‘pay yourself first‘ in personal finance books. It is through this that we can gradually become financially free.

There are people who go for 40% or 50% or even 80%. It is here, most of us fail and remain mediocre.

Step 3: Invest the Savings – To increase Income

Saving and investing are different. Saving is keeping aside our money for easy access when we need. We also don’t expect much return.

However, investing is putting the savings or the money we don’t need for quite some time into something where returns would be higher.

The process of building an emergency fund is saving. But investing is like buying shares, bonds etc. Investing is after saving. 

43% of my net worth is stocks. I benefit from dividends and capital gains. Investing in Bhutan stock market is easy with an mCaMS App.

We can also invest in various income-generating properties. We must be careful in this step.

Lack of a proper mindset and discipline lure us into purchasing liabilities like cars that will only eat away our seed money.

Step 4: Reinvest Returns – Increasing Your Wealth

If my ultimate goal is to own a jersey farm, I shouldn’t be selling the new born calves. It applies to building wealth as well.

The dividends or profits on sale of those investments can be put back to increase the capital money that works for me.

BNBL declared 45% dividend and you own 10,000 shares. If you reinvest that dividend income, it’s 1500 new shares at the current price.

It’s that simple. We can also build other income-generating portfolio with this same logic.

Step 5: Aim Financial Freedom – Freedom of Choice

You become financially free when you do not work for money – meaning you can live on income of your investments.

The state is called financial independence. People who work hard to earn income, save, and invest them do just to attain this freedom.

Once you attain this freedom, working for money is optional. You’ll have regular passive income from your investment.

I am not financially independent yet. But I will get there slowly but surely. This is my ultimate objective. 

In the personal finance, people use a 4% rule to calculate how much one needs as capital to attain financial freedom and retire early.

It is also called a 25X rule of retirement. It recommends saving 25 times of our expense and then live withdrawing 4% of the amount.

There are also other assumptions for this rule. However, I’m not sure how it would work in Bhutanese context.

How do you build wealth? If you have a different method or strategy for building wealth, please share in the comment.

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