The Basics

Ok, so this may seem incredibly obvious to most people, but there is a basic path to building wealth. In writing this, I'm going to assume that you are starting where I did: with debt, no savings and a low paying job! If you're already ahead of the game, then feel free to skip to the next step.

Stage 1. DEBT

Most people these days begin their adult life in a cycle of working to pay off debt and then buy stuff. They tend to get stuck in this cycle for a while. Some never leave. 'Tis a sad sad existence!

So before you do anything else, you NEED to pay off your debt (and point-blank refuse to get any more). This part is key. If half of your salary every month is going towards keeping the debt collectors away then you aren't going to amass a fortune any time soon.

If you have multiple debts (credit cards, car finance, student debt, personal loans, mortgage) then start by covering the minimum interest payments so that the debts aren't building any further. Then work on chipping away at the highest interest debt until it's gone and continue working your way up. This stage can take a few years, but every loan you destroy will effectively give you a pay rise! If you reallocate each one of those mini pay rises into paying off another loan, your total debt will disappear even faster.

Stage 2. SAVINGS

Once the debt is gone and you have all that extra money to spend, begin saving aggressively. The more money you have to play with, the more asset options you'll have later on (don't start slacking now, just because your degree is paid off).

Some finance gurus advise keeping between £1-5k (or 6-12 months salary) in an easily accessible savings account for emergencies rather than investing. Until you have a regular passive income stream, that may or may not be useful depending on your individual outgoings. Mine were so low when I started Stage 2, that surviving on practically nothing was normal and losing my job wouldn't have made much difference. But if you find having a safety net reassuring, then do it.

Once you have at least £1,000 in the bank, you can start asset shopping.

Stage 3. ASSETS

These are the beautiful creatures that will make you money. Now that you have savings and no debts, you can start building your army of digital financial slaves that will work day and night to make you rich!

You'll want to build a portfolio that's a mixture of short term, long term and retirement focused investment. I have regular company pensions, a SIPP, a basic ISA and a cash Lifetime ISA, a regular savings account, 1-2 year bonds, a property investment portfolio and a short term share trading account. The first two are for retirement, the ISA and regular savings are for short term items (weddings, family, emergencies), the LISA is for a house deposit, and everything else is for any medium term expenses (a car, qualifications, furniture when I buy a home, etc).

It might sound a bit extreme to plan out your entire life this way, but I've always preferred to have a set plan to follow. I was thinking about retirement back when I was in my teens! But readjust your investments for whatever specific goals you have. The main point is to have your money working for your future self.

Stage 4. END GAME

The goal is to one day have so many assets making you money that all your expenses are covered and you no longer need to work. At that point you have won at life and may congratulate yourself by partying hard on the street! Or, if you're like Warren Buffett, you can continue to make more money until you have a net worth large enough to buy a small country!