The Way to Wealth

Neil Gartner |

 “If you know how to spend less than you get, you have the philosopher’s stone.”   Poor Richard [1]

Despite linguistic roots in the Old English wela, meaning “happiness and prosperity in abundance,” to most people wealth means “money and possessions in abundance.”

I like Thoreau’s definition: “Wealth is the ability to fully experience life.”   It encompasses the full nature of wealth, but has clear financial planning implications.  Accumulating financial wealth is essential to reaching many life goals.

In my journey to becoming a CFP® I learned that wealth-building hinges on a host of factors of varying importance depending on individual circumstances.  (Underscoring the importance of holistic, personalized financial planning!)

Fortunately, it turns out you only need do a few simple things right to succeed.  For most, the number one success factor is saving in an intentional and meaningful way.

Andy Clarke of Vanguard reached the same conclusion on his path to becoming a Chartered Financial Analyst® (CFA®): “If I could offer one piece of advice to new investors, it would have less to do with high finance and more to do with Poor Richard: Save.” [2]

You’re probably thinking, wow, Neil (and Andy), that’s your key takeaway from all that time and effort?  Yep, the basics really are that simple: save, avoid debt and insure risks that could wipe you out.  The fancier stuff may just help you reach your goals a little faster.  (Provided they don’t cost too much – topic for a future post!)

A recent article underscored this and inspired this post.[3]  The all-star team of authors argue that expected below-average future market returns and longevity trends will require more savings than previously needed to maintain a pre-retirement lifestyle.  In fact, they estimate that the “safe” level of savings for most retirees has risen 50% since 2000!

Wait – before you put down whatever device you’re reading this on and reach for the remote – there’s hope!  Over decades of investing I’ve learned that the future rarely looks like that predicted by the pundits.  Nevertheless, future uncertainty is even more reason to finally make planning for your future a priority.

 “One today is worth two tomorrows.” Poor Richard

The keys to your financial future rest in your hands, not with Wall Street wizards or Washington wonks.  Here are some savings tips[4]:

  1. Start early. Some younger folks de-prioritize savings because they feel they don’t make enough and/or have more-pressing needs (or wants).  But time is a powerful financial lever; the more of it you use, the easier it is to make your goals.
    • Example: Assume your goal is $1,000,000 in today’s dollars by age 65.  Assuming a 6% “real” return (after inflation), you’d need to save about $1,000 in today’s dollars each month starting at age 35.  But if you start at 25 instead, the amount you need to save drops by 50% – $500 per month!
  2. Get out of debt. Debt is negative savings.  Eliminate all debt but the mortgage, and aim to have that gone too by retirement (if not sooner).
  3. Get an emergency fund. Your first savings priority: 3-6 months of essential expenses in safe, liquid savings.   Life happens, and an emergency fund provides a cash cushion to keep you out of debt and on track towards your wealth-building goals.
  4. “Pay yourself first” on autopilot. You’ll quickly learn to live on less if you never see it in the first place!
    • Take advantage of employer plans that automatically deduct savings from your paycheck – especially if they offer a savings match. (Free money!)
    • Setup automatic monthly transfers to a self-directed IRA, HSA, college 529 plan and savings accounts for shorter-term goals.
  5. Sign up for automatic annual increases in your employer’s plan. More and more employers offer this to help employees ease into saving more.  (General rule of thumb: 15% of gross pay for retirement.)
  6. Save at least half your annual raises.
  7. Do a “Spending Plan” and stick to it. AKA the dreaded “b” word: Budgeting.  Not most people’s idea of fun, but it’s the best way to wring more savings from your current income.  Email me for my free Speedy Spending Plan Excel template, or check out free online apps like
  8. Stop raiding your retirement.
    • Don’t cash out old employer plans! Roll them over into an IRA or current employer plan instead.
    • Don’t borrow from your 401(k)! These risky loans (generally must be repaid within 60 days if you leave or lose your job) unplug your retirement savings from higher-return investments.
  9. Work longer. The recommended 15% retirement savings rate assumes a minimum 30-year career.  If you’re deeper in and need to play catch-up, you may have to save more, work longer or both.  But see a trusted advisor first – everyone’s situation is unique.

START TODAY!  Call or write if you have any questions or are interested in a personalized savings plan.  I give free initial consultations, which may be all you need right now.  If we decide you need a deeper dive, I’ll prepare an obligation-free proposal for your consideration.

[1] The title of this post is a nod to Benjamin Franklin’s essay “The Way to Wealth,” a collection of wise sayings from Poor Richard’s Almanac. The philosopher’s stone was the central goal of ancient alchemists: a stone that would turn ordinary metals into gold.  Harry Potter fans may be interested to learn that the first book in the series was originally released in the U.K. as “Harry Potter and the Philosopher’s Stone.”   J.K. Rowling’s American publisher advised the change to “Sorcerer’s Stone” for marketing purposes.

[2] “My one piece of investing advice,” A. Clarke, Vanguard Blog 5-19-2014.

[3]“Savings, Not Returns, Key to Secure Retirement,” D. Blanchett, M. Finke, W. Pfau, Commentary 2-11-2017.  Morningstar is a great general investing and personal finance resource for aspiring “do-it-yourselfers.”

[4] May or may not apply to your specific situation – seek professional advice tailored to your needs.