Want to know the key to building wealth? Here's how our savings rate was able to more than quadruple in the last several years. This strategy works for everyone!

It’s always astounding what a difference a few years of investing can make! One of the things my wife Miel and I have been doing is actively driving the process of how we build wealth by investing in stocks, saving aggressively (or not so aggressively) and self managing our real estate.

Well, this long term investing appears to be paying off in terms of higher cash flow.

Back in 2005 we were getting a house down payment together. It took us about 14 months to save up $21,000. That’s not too bad. But contrast that with today. We recently set the goal of saving $100,000 so we can start getting serious about buying multifamily property. So, we’ve been saving like the dickens – and it’s working. Over the past couple of months we’ve managed to sock away about $10,000. That’s about $5,000 per month – far more than our savings rate back in 2005.

Saving 10000 dollars

So what’s driving the change? In a word: assets.

Back in 2005, we only owned one investment property. Now we have four. This has resulted in a couple of favorable advantages, including more flexibility and increased cash flow. For example, we refinanced one of our properties which meant we were able to skip making one monthly payment and got our escrow funding back – this freed up $6,029.07. Also, we are able draw on the profit from our rental properties to add to our savings. Two months from our rental places yielded approximately $1,408.43 in profits. The rest came from our earned income (e.g. salaries) and we’ve been able to make some money from our internet businesses as well ($151.61). The dollar values aside, a major reason we are doing better now is because we have more cash producing assets – more real estate and an internet business.

I’ve always been a bit of a skeptic regarding compound interest projections as they pertain to net worth growth, but if the last few years are any guide, saving the best compound interest investments and investing over time can really make a difference in your bottom line. You just gotta keep saving, investing, reinvesting, saving and reinvesting again. Eventually the needle will start to move.

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James Hendrickson is an internet entrepreneur, blogging junky, hunter and personal finance geek. When he’s not lurking in coffee shops in Portland, Oregon, you’ll find him in the Pacific Northwest’s great outdoors. James has a masters degree in Sociology from the University of Maryland at College Park and a Bachelors degree on Sociology from Earlham College. He loves individual stocks, bonds and precious metals.

MANAGE YOUR MONEY TOGETHER

Here are some simple guidelines for DINKS to build wealth:

1) Collaborate: Meet regularly to talk about money, set goals together, track and monitor them.

2) Understand and respect your partner. Take time to understand your partners values about money.

3) Watch the numbers. Get a budget, monitor your spending and track your net worth.

4) Max your retirement. Maximize contributions to your tax deferred retirement accounts.

5) Invest in stock. Stocks perform better than bonds or cash.

6) Avoid high interest debt. Credit cards and title loans are financial cancer.

7) Diversify. Don't put all your eggs in one basket.

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