Our Wealth-Building System: The C.A.L.M. Approach

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the calm approachEvery dojo offers a system, focus, and set of techniques for teaching students to protect themselves and achieve their goals. In martial arts, the systems go by names such as Jiu-jitsu, Taekwondo, Karate, Judo, etc.

Here at Financial Dojo, we teach the CALM Approach™ or System. That’s why our tagline is, “Take the C.A.L.M. Approach to Building Wealth”. It’s clear, simple, and perfect for anyone who wants a proven strategy that works. It’s the personal finance and wealth-building philosophy that I have followed for years. The 4 elements of the CALM Approach™ are these:

(C) reate a Roth IRA
(A) ccumulate savings faster than debt
(L) ive a positive balanced life
(M) ultiply your income streams

After gaining a basic understanding of each element, you should be able to implement the approach immediately. Remember them as you read the information, tips, and techniques covered under your wealth belt level.

Here’s a more detailed explanation of each component that will help them stick in your mind:

Create a Roth IRA

The first element of the CALM Approach™ is to create a Roth IRA (Individual Retirement Account). You can open a Roth IRA at a bank, credit union, brokerage firm, or other financial institution that offers them. .

Through your Roth account, you can invest in stocks, mutual funds, bonds, etc. Your personal contributions to the account are made with after-tax dollars (your take home pay). The beauty of a Roth IRA is that if you just contribute to it regularly and let it grow until you reach age 59.5, then every cent you withdraw afterwards is 100% tax-free. That’s an awesome deal.

Of course, not everyone is allowed to create a Roth IRA. There are income limitations. However, this won’t affect most people. But if so, a Traditional IRA is a great option. This is all covered in more detail in the wealth belt mini-courses.

Accumulate Savings Faster Than Debt

The second element of the CALM Approach™ is to be conscious of accumulating savings faster than growing debts. Nothing creates a bigger barrier to building wealth than piling up “empty” debt. Empty debt is what you get when you buy a new car that depreciates by 20% as soon as you drive it off the lot. It’s running up your credit cards on more clothing, jewelry, entertainment, trips, etc., than you really need.

By no means am I suggesting that you should live like a hermit or pauper. Heck, I love fun and having nice things. But what I am saying is to put saving first, then see what’s left to have fun with.

For example, you should budget for a minimum percentage of your income (such as 15%) to go towards savings. If it helps, set up your paycheck so that the money is directed into your savings and investment accounts automatically. Out of sight, out of mind.

Live a Positive Balanced Life

You might be scratching your head wondering how or why a positive balanced life contributes to building wealth. Actually, it’s quite simple. Positive energy attracts good things and negative energy repels them. I certainly would not want to spend my life surrounded by a bunch of “whoa-is-me” people who ask to borrow money from me every week.

A balanced life is one that avoids being so excessive in one area that it hurts other aspects of your life. For example, a workaholic could be sacrificing his relationship with his family. A heavy smoker could be shortening her life expectancy, thus reducing her earning potential and not being around later in life to love and mentor her grandchildren.

By being positive and balanced, you’re more likely to attract better business and job opportunities, earn more money, and live a longer, healthier and prosperous life.

If you have lots of people in your life who seem to drain, rather than boost, your energy, it’s time to let them go. Seek out people who give you the confidence and support to help you achieve your dreams. Avoid the takers and haters.

Multiply Your Income Streams

The final element of the CALM Approach™ is for you to create multiple streams of income. Do you know how McDonald’s went from being a mom and pop hamburger stand to a multi-billion dollar business? It’s because the founders knew they couldn’t make a billion dollars by themselves with one restaurant. But they realized it could be done by replicating their restaurant concept, skills, and processes a thousand times over and having franchisees pay them royalties year after year.

My point is that if you want to build lasting wealth, you have to find ways to generate income from multiple sources. Certainly, your job represents one income stream. And if you create a Roth IRA, your investments in it will earn profits over time. That’s a decent start, but it’s not nearly enough.

You should also put money in other investment vehicles. This might include a 401k), 403(b), or whatever retirement plan your employer offers. You can also invest in mutual funds, real estate, etc.

But even that might not be enough if your wealth goals are high. You may have to find a way to raise your overall income. So, while the savings from your job are working hard for you, think about how you can also replicate your skills, knowledge, and talents beyond that.

A second job would no doubt add another income stream. However, my favorite is to create an online business, which can provide extra income while you sleep.

As you can see, there’s nothing really complicated about the CALM Approach™. You can quickly open a Roth account, even online. Accumulating savings faster than debt requires a change in mindset and establishing priorities. Next, it doesn’t cost anything to live a positive balanced life. Finally, you’ll accelerate your wealth by creating multiple income streams that put your money to work and makes full use of your skills and talents.

So if you don’t already have a wealth building strategy that you follow, take the CALM Approach™. Commit it to memory right now. Make it your framework for dealing with money and living your life.