How to Build Sustainable Wealth and Get Out of Debt

Getting out of debt is an early step to what you want to accomplish with your finances. You want to be more financially stable. You want to be able to afford to do things in life like travel or pursue other interests that your present financial situation doesn't allow you to do. You also want to be able to provide for yourself in a way so that you don't outlive your money. In other words, you want to have financial freedom. So let's talk about the basic foundation for financial stability. 

There are Five Steps to Building Sustainable Wealth. 

1. Protect what you have and own

The first step is to protect what you have, protect your family, and your ability to work and provide for yourself. You want to start protecting what you already have before you add more to it through saving and investing, or you'll only have more to lose. You can protect what you have for pennies on the dollar, through life insurance, which we'll talk more about later.

2. Saving to bring a return on your money and build liquidity

The next step is saving your money. Saving money is important. Maybe you even remember sometime during your youth that one of your parents, your grandparents, maybe a teacher or a neighbor mentioned the importance of saving a portion of the money you earned. You might have been told to save for future expenses. The problem is that if these future expenses aren't clearly spelled out, you might get the idea that whenever a future expense arises, you're justified in using your savings. That can result in a savings account with a near zero balance whenever an expense comes up. That is what some people call the sinking fund method of saving, saving up, spending, and starting back at zero. Now, along comes credit in the form of credit cards or loans, and now we find that we can first spend and then make payments and savings doesn't even play a part in that process. Let's face it. Some savings vehicles, such as savings accounts, don't provide much of an incentive for saving because our saved money earns almost no interest. Other types of financial accounts masquerade as savings vehicles when, in reality, they are investments. While investments can provide the opportunity to gain, they can also set you up for loss, even of your original money. If you use these types of financial accounts, you actually skip both the step of saving and building equity and jump to the last step in building wealth, which is investing. Since you're not ready for that kind of risk yet, you don't want to do that. Skipping ahead and missing steps will not put you on a solid foundation for building wealth.

3. Setting up your savings to make money for you

There are two reasons you want to save. One, to bring a return on your money, and two, to build equity or liquidity. You want to have a portion of your money bringing you a return and working for you. Over time, more and more of your money can produce an income for you, so that you don't have to work as hard to produce an income for yourself. This can free up your time to do more of the things you want to do, providing you greater financial freedom. Since you're not ready for that kind of risk yet, you don't want to do that. Skipping ahead and missing steps will not put you on a solid foundation for building wealth. There are two reasons you want to save. One, to bring a return on your money and two, to build equity or liquidity. You want to have a portion of your money bringing you a return and working for you. Over time, more and more of your money can produce an income for you so that you don't have to work as hard to produce an income for yourself. This can free your time to do more of the things you want to do, providing you greater financial freedom. Building equity will eventually give you the freedom to take advantage of investment opportunities that come along when you are in a better financial position to participate in the investment. Acquiring the good money management skills through implementing these steps, saving money, getting out of debt will help you to be more discerning of investment opportunities.

4. Excel by eliminating debt and building equity

Step number three is twofold. It's eliminating debt and building equity or liquidity. As you know, this process is easier said than done. It has to be approached sensibly, systematically, and it has to be sustainable. A sustainable workable plan. You see, many people think that if they're going to get out of debt, they have to deprive themselves of spending any money not absolutely necessary to spend on anything other than getting out of debt. While it's true that there does have to be a certain amount of discipline and focus on getting rid of debt, you also need to have balance. Think of it this way. You've probably known someone who has gone on some sort of a fad diet. These people get completely focused on a certain group of foods, drinks, nutritional supplements, or whatever else that this diet recommends. They lose weight but oftentimes after a few months, these people gain the weight right back. Sometimes with a few extra pounds as well. What usually happens with these dieters is that they starve themselves of a certain amount of caloric intake or they deprive themselves of normal social eating behaviors, and then they binge to make up for what their body or their emotional being is craving. On the other hand, if someone chooses to lose weight by making modifications in their diet for more healthy eating practices, the weight loss may not occur as rapidly but it is usually sustainable. The adjustments to their diet may need to be more vigorous at first, but it can become less strict and more natural and balanced as time goes on. The same is true with eliminating debt. You don't want to try to implement a plan that is so difficult to maintain that you wind up not sticking to the plan, or worse yet, that you binge spend and end up with more debt than what you started with in the first place. It happens.

5. Investment can be a risk to your living wages

What if I told you that there was a way to do the first three steps to build wealth: protect, save, and get out of debt simultaneously? Doing all three at once might take you a little longer to get out of debt, but the first two steps, protecting and saving, secures you as you work on that third step, paying off your debts. Think of it as a safety net. We'll talk more about combining all three of these methods later when John talks about the Perpetual Wealth Code of paying off debt. Finally, remember that investing is the last step in building sustainable wealth. Investment, by definition, comes with a risk of 100% lost. While many people entertain a tempting fantasy to make a quick investment that hopefully pays off big so they can quickly pay off their debt, it could also mean a huge loss that would put you much further behind schedule. And that's not a good risk. 

About the author 

Jack Marbida is a husband to his wife Wene and a father of 2 little boys Isaac and Israel, he is a financial advisor, speaker, and writer who helps families be financially stable and grow their relationships. He works with families to help them reach their goals by teaching them about financial literacy and helping them develop a healthy relationship with money.

He has been featured in Sun Life Financials and others for his work as a financial coach. He is also the founder of Online Advisors Financial Education, which provides free educational content through blogs and videos.

Jack speaks at conferences across the Philippines on topics such as family finances, and personal and professional growth.  

You can contact Jack Marbida through his social media accounts or email him at papajackph@gmail.com.

Cheers!