The Pyramids at Giza in Egypt have stood for more than 4500 years. They have stood the tests of time because the base foundation structure and each layer above was built on a broader solid layer beneath. This is also the way to build your wealth pyramid – to ensure it will also stand the test of time.
In building your wealth pyramid, you will have seven layers – each added in the correct order
Wealth Pyramid Layers
Layer 1 – Success Mindset – This consists of your beliefs, belief in yourself, your habits and their alignment with achieving and maintaining wealth.
Layer 2 – Appropriate Skills and Knowledge – This is your application of your skills and knowledge, and the skills and knowledge of your advisor. Remember knowledge, not luck, is the building block you need, so your first investment is in knowledge.
Layer 3 – Clear, Well Thought Out Action Plan. – Your plan should include your approach to investing and a clear path looking at which opportunities to focus on and projected timelines. Consider appropriateness of trading and investing for your wealth creation.
Layer 4 – Risk Management. – All investing has an element of risk, as does any business. Risk management, as opposed to risk tolerance, is identifying potential risks and taking actions to minimise the potential for losses.
Layer 5 – Cash Flow – You need positive cash flow to live on today. Whilst equity increases your net worth, having a positive cash flow reduces your risk of going broke with low yield high equity growth investments.
Layer 6 – Increasing Equity – Whilst you need cash flow to live on today, equity will give you long term security and the money to live on tomorrow. For the best of both worlds, Having the right balance with your equity growth investments and positive cash flow will give you the best of both worlds for a solid pyramid as it grows higher.
Layer 7 – Wealth – To ensure you have the ability to enjoy the lifestyle you want when you choose to no longer work. Whilst most wealthy people continue to work because they enjoy it, having the choice to stop if and when you want to is a good objective for your plan.