The foundation layer is cash flow. Before someone can truly begin building wealth, he or she must consistently generate enough income to handle month-to-month expenses. It’s also a good idea to have enough savings set aside to cover at least two months, and if possible three to six months of living expenses, in case of a financial emergency.
Once the cash flow foundation is in place, you can begin to invest in assets — investments, such as real estate or stocks. These investments will hopefully appreciate in value over time and allow you to retire at some point in the future with a comfortable lifestyle.
Moving up the pyramid, the next layer is your estate, the wealth you’ll pass on to your family. If you’re a business owner, this could include your business.
At the pinnacle of the pyramid are your legacy goals, or your philanthropic goals — the many positive ways you might share your wealth by giving back to your community.
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