How to Build Wealth in 5 Steps

Here’s the deal: Building wealth isn’t complicated. It’s actually really simple.

If you follow the commonsense principles that come straight from the Bible and your grandma, you’ll win with money and build wealth. Period. It doesn’t matter if you’re 25 or 52—these truths are foundational and constant at any age.

We’ve been teaching the same wealth-building principles for more than 30 years. And guess what? Millions of people have crushed debt, built wealth, and retired with millions of dollars in their retirement accounts. The proof is in the pudding—this stuff works

How to Build Wealth

1. Have a written plan for your money (make a budget).

The first step to building wealth is to make a budget each month. Why? Because if you don’t tell your money where to go, you’ll always wonder where it went.

When our team completed The National Study of Millionaires, we found that 93% of millionaires said they stick to the budgets they create. Ninety-three percent! Getting on a budget is the foundation of any wealth-building plan.

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You can make your own budget in five easy steps:

• List your income.
• List your expenses.
• Subtract your expenses from your income (the difference should equal zero).
• Track your expenses (all month long).
• Make a new budget before the next month begins.

Need help getting started? Check out EveryDollar. Our budgeting app does more than just help you track your spending and manage your money—it helps you find more margin every month!

2. Get out (and stay out) of debt.

Let’s get one thing straight: The only “good debt” is paid-off debt. Your most powerful wealth-building tool is your income. And when you spend your whole life sending loan payments to banks and credit card companies, you end up with less money to save and invest for your future. It’s time to break the cycle!

The best way to get out of debt is by using the debt snowball method. That means paying off your debts from smallest to largest, building momentum as you knock out each balance one at a time. Here’s how it works:

• Step 1: List your debts, starting with the smallest outstanding balance all the way up to the largest (regardless of interest rate).
• Step 2: Make minimum payments on all your debts except for the smallest debt.
• Step 3: Throw as much extra money as you can at your smallest debt and keep going until it’s paid off.
• Step 4: Take the amount you were paying on your smallest debt and add it to your payment on the next-smallest debt until that one’s gone too.
• Step 5: Repeat until all your consumer debt is paid in full and you’re completely debt-free!

Millionaires know that interest paid (on debt) is a penalty, and interest earned (through investments) is a reward. You can either send all your money to big banks by paying interest on your debts or you can kick all that debt to the curb and take your life back.

3. Live on less than you make.

There’s a myth out there that you must have a high-paying job to build wealth. But that’s just not true!

Chuck, a member of THE Ramsey Baby Steps Community on Facebook, used to think all millionaires owned private jets, rode around in limousines, and ate caviar all the time. But as he grew older and began to see how millionaires lived their lives and built their wealth, he realized that mental image he’d created couldn’t be further from the truth.

“I have walked amongst many millionaires and never even knew it,” Chuck said. “There are a lot of people who are following the Baby Steps, who have and will acquire a net worth of a million dollars or more. It’s a wonderful accomplishment, a worthwhile goal.”

Of all the millionaires we studied, only 31% averaged $100,000 per year over the course of their careers and—get this—one-third never made six figures in any single working year of their career.

That’s why one of the keys to building wealth is to live on less than you make. The typical millionaire has never carried a credit card balance in their entire life, spends $200 or less on restaurants each month, and still shops with coupons—even after reaching millionaire status! They understand that the habits that helped them build their wealth are the ones that’ll help them keep it.

Proverbs 21:20 (NIV 1984) says, “In the house of the wise are stores of choice food and oil, but a foolish man devours all he has.” Translation? Wealthy people don’t blow all their money on stupid stuff. The myth that all millionaires live lavish lifestyles with Ferraris in their garage and lobster dinners every night is just that—a foolish myth. 

If you’re struggling to figure out why you’re feeling stuck, take a close look at your budget and find ways to say no to stuff you don’t need:

• Subscriptions you don’t use
• Expensive brands that are no better than generic
• Disposable, single-use items
• Impulse buys
• Food away from home (including that expensive daily latte!)

So, ask yourself: Do you want to act rich or actually become wealthy? The choice is yours.

4. Save for retirement.

It’s simple: You have to invest your money so it can outpace inflation through compound growth. Investing in the stock market might feel scary, intimidating and complicated—but it doesn’t have to be.

According to The National Study of Millionaires, 3 out of 4 millionaires (75%) said regular, consistent investing over a long period of time is the reason for their success. They don’t get distracted by market swings, trendy stocks or get-rich-quick schemes. Instead, they focus on the basics: saving money and investing.

Once you’re debt-free with a fully funded emergency fund in place, invest 15% of your gross income for retirement with tax-advantaged retirement accounts like a 401(k) or Roth IRA. If you’re not sure where to start, just remember: Match beats Roth beats traditional.

• If you have a company match through your workplace retirement plan, like a 401(k) or 403(b), start there. A company match is free money, so don’t leave that on the table.
• After that, open up a Roth IRA and max out your contributions there so you can take advantage of tax-free growth and withdrawals in retirement.
• Then, if you still haven’t hit 15%, go back and invest more in your workplace retirement plan.

Spread your investments in those accounts evenly across four types of growth stock mutual funds: growth and income, growth, aggressive growth, and international. That way, you’re lowering your investment risk by not putting all your eggs in one basket.

Here’s a Tip: You can diversify even more by investing in real estate too. It’s not for everyone, and it’s important to be in the right place financially before you dive in. But if you’re up for it, real estate can be an awesome investment as part of a balanced portfolio.

5. Be outrageously generous.

Don’t miss this, y’all. No matter where you are on your financial journey, it’s important to develop a habit of generosity. Why? Because you’re blessed to be a blessing. At the end of the day, true financial peace is having the freedom to live and give like no one else.

Something amazing happens when you realize your money isn’t yours—that everything you have actually belongs to God. When you make peace with that idea, you can develop a generous heart. Then you can give with joy, gratitude and faith. And that’s a completely different way to live.

Listen, we’re not shy about our faith. As Christians, we believe tithing—or giving a portion (10%) of your income to your local church—is one way to demonstrate trust in God. God is a giver, and when we’re generous, we reflect that part of His character. Besides, generosity is the most fun you’ll ever have with money—and it starts with tithing.

But you don’t have to stop there! Here are a few other ways you can practice outrageous generosity in your own life:

• Give your money. You can anonymously bless someone in need, give financial support to a cause you’re passionate about, or give directly to a family or person in your life who needs some help.  
• Give your time. Whether you want to volunteer at your local church or homeless shelter or help that new mom next door take care of some household chores, make time in your schedule to lend a helping hand.
• Give your talent. Are you a teacher? Maybe you can offer free tutoring to a student who needs extra help. A mechanic? Perhaps you can fix that struggling family’s car—on the house. Someone needs what you have to offer!
• Give your possessions. Instead of throwing away those T-shirts or dresses you barely wore, donate them to a local organization that gives clothes to those who need them.

When you make giving part of your life, it doesn’t just change those around you—it changes you. Studies have shown over and over again that generosity leads to more happiness, contentment and a better quality of life.¹ You can’t put a price tag on that!

Whatever it looks like for you, start making generosity a normal part of your life. You’ll never regret it.