The “Wealth Triangle” — A 3-Step Guide to Growing Your Wealth
“The name of the game is not to get rich. The name of the game is to get rich and STAY rich.”
— Dan Lok
To be completely transparent, I stole the idea of the “wealth triangle” off of internet entrepreneur Dan Lok.
My Dad is a big fan of his. I’m not, but I found this particular idea too good not to share.
In this video, Dan introduces a three-step method to generate wealth, or in his words, to “get rich and stay rich.”
These three steps are incredibly straightforward, but they blew my mind nonetheless. As master Reinassaince artist Leonardo Da Vinci said, “simplicity is the ultimate sophistication.”
Here are the three simple steps that form the “wealth triangle.” For an exclusive insight that completely revolutionized my approach to entrepreneurship, look out for that here as well!
1. Firstly, Focus On A High-Income Skill
The first point is by far the most important.
A high-income skill is the base of the “wealth pyramid.” Think of it as the foundation of a house. Without deep foundations, it is difficult to build a tall and long-lasting abode.
Dan classifies a high-income skill as a skill that could make you $10,000 a month.
That is a lofty goal. Only 9% of Americans make 6-figures annually, and if you factor in worldwide statistics, it falls to about 6%.
Personally, I think $10,000 is an arbitrary number. Don’t get me wrong, hitting such a high level of income consistently will be a dream come true for many — myself included.
The point Dan is trying to get across is you should not put the cart before the horse.
A recurrent income stream serves a myriad of purposes, chief among which is a safety net. Ensure you have a consistent source of income coming in every month before investing in the latest fad or starting your dream business.
Here’s an example from my personal life. I run an event business. Things were going great, but ever since COVID-19 struck, sales have completely dried up.
Thankfully, I possess a high-income skill — writing.
I’m making side-money from writing articles like these on Medium, and I’m also doing freelance copywriting and content creation on the side. Writing has helped me stay afloat in tough times.
Here are some high-income skills Dan recommends:
- Copywriting
- Consulting
- Digital Marketing
- Content Creation
- Sales
Remember, first, maximize your earning potential.
However, there is only so far you can go trading your time for money. When you hit an earning cap, you’ll know it is time to move on to the next step: starting a business.
Not just any business though….
2. Operate A Scalable Business
Now, before you carry on reading, I want to make this clear — starting a business is the least important aspect of the “wealth pyramid.”
If you’re not entrepreneurial-minded, I recommend you skip this section and go straight to the third and final point.
Not everyone is cut out to be an entrepreneur — the lifestyle simply isn’t for everybody. I should know. I scraped together $1000 from my savings to kickstart an event business and built it to 5-figures solely using my beat-up old iPhone.
And it is, by far, the hardest thing I’ve ever done in my life.
Dan concurs. To paraphrase him:
“A business takes a tremendous amount of effort to build. Don’t believe that you can start a business and make money within a few months. Be prepared to go a year, two years or three years before making a profit. The only way a business goes out of business is if it runs out of cash.”
Let me repeat that:
“The only way a business goes out of business is if it runs out of cash.”
This brings us back to our first point — developing a high-income skill. If you have a good amount of money coming in every month, your business is much more likely to survive.
If you want to give entrepreneurship a try despite these cautionary tales, here are some scaleable business ideas:
- E-commerce (Amazon, Dropshipping)
- Consulting & Coaching
- Content (Blogging, YouTube)
- Continuity/Membership Programmes
- Events (Seminars, Retreats)
Dan explicitly cautions against businesses that will take large amounts of capital to start up, such as restaurants and franchises.
The whole idea of starting a scalable business is for cash-flow and leverage.
However, there is another powerful way we can accomplish this. A less sexy way than entrepreneurship, to be sure, but consequently less risky and utterly inexorable.
Investing.
3. Invest In High-Return Investments
We’ve come to the last point, the pinnacle of the pyramid.
If the purpose of developing a high-income skill is stability, and the point of running a business is leverage, the purpose of investing is to build wealth.
“…there is a major difference between rich and wealthy. The difference is in duration. How long does the money last? Will it be gone once the person’s earning power is gone? Will it be passed on to future generations?”— Difference between rich and wealthy, Street Directory
To paraphrase Floyd Mayweather, masterful marketer and one of the wealthiest athletes of all time, “It’s not about me. It’s bigger than that — it’s about keeping the money in the family for generations.”
To accomplish this, Dan recommends high-return investments, defined as investments that will generate a minimum 10% return every year.
This includes:
- Cryptocurrencies
- Penny stock trading
- Property
- Commodities (oil, gold etc)
- Angel investing
By nature, these investments are speculative and therefore riskier. Dan’s idea is that the stability of being a high-earner will help to mitigate this risk.
Now I’m no millionaire entrepreneur, but here are my two cents. Speculate all you want, but also invest in assets that are more dependable. Play the long game. As billionaire investor Warren Buffet says, “Our favourite holding period is forever.”
My ideal portfolio would include the riskier investments Dan suggests, but also include a healthy mix of things I’ll be happy to own forever and pass on to my forebears. These include property, land, art, as well as blue-chip and dividend stocks/REITs.
Remember, when it comes to investing, diversification is the name of the game.
In Summary: Develop A High-Income Skill, Start A Business Only If You Want To — & Invest Wisely
As promised, here is the simple but paradigm-shifting insight.
After you develop a high-income skill and start making great money, you can skip straight to investing.
You don’t have to start a business if you don’t want to!
If you’re less entrepreneurially inclined, or simply would not like to deal with the hassle that comes with running your own business, this is the best path.
In fact, this is the primary, “old-school” way people got wealthy. Work at a well-paying job, then save up money and buy assets.
Straightforward as can be.
To reiterate, developing a high-income skill is the most important step. It’s akin to laying a deep foundation for a family house — it will serve you well for years to come.
Once you develop a high-income skill, the sky is the limit. Start a business if you’re so inclined, but more importantly, invest smartly.
And that’s how you build wealth for generations.
