3. Investment returns on the surplus that #2 and #1 make available.
It's a three-legged stool. Take any of the legs away and it fails to work.
I'm at the point now where most years I make more gains in net worth from the market (#3) than I do from #1 and #2 combined. If I had held all of the surplus in cash and bonds, I'd have way less than half of my current net worth. Way less.
I am smart and work my tail off, and most of my net worth today is traceable to the following three factors:
1. A solid, strong income from technology work; no gaps in employment.
2. Spending less than I make. http://www.mrmoneymustache.com/2012/01/13/the-shockingly-sim...
3. Investment returns on the surplus that #2 and #1 make available.
It's a three-legged stool. Take any of the legs away and it fails to work.
I'm at the point now where most years I make more gains in net worth from the market (#3) than I do from #1 and #2 combined. If I had held all of the surplus in cash and bonds, I'd have way less than half of my current net worth. Way less.