By Scott Trench and Mindy Jensen
Hosts of the BiggerPockets Money Podcast
Personal finance is littered with distractions—get-rich-quick schemes, viral hacks, and fleeting investment trends that prey on hope rather than deliver results. True wealth, however, demands adhering to proven principles: discipline, systems, and selective risks. These aren’t suggestions; they’re principles learned from decades of observing what works and what fails. Real estate investing exemplifies their power, turning controlled expenses into rental empires and strategic bets into generational wealth. Without this foundation, even savvy deals collapse under poor habits.
These are our 7 Core Principles for Success in Personal Finance—a no-nonsense framework to master your money. Implement them, and you’ll find yourself snowballing wealth over the years and decades, perhaps faster than you could have imagined.
1. Live Below Your Means: Master the “Big Three” Expenses
The foundation of wealth-building starts with spending less than you earn—and the quickest path is controlling the “Big Three” expenses: housing, transportation, and food. According to the Bureau of Labor Statistics (BLS), these categories devour more than 60% of the average household’s budget. Keep these in check and you could swing from saving nothing to stashing 30-50% of your income.
Housing often tops the list at 30-40% of take-home pay for many. Buy less than you can afford: Opt for a modest home or, better yet, house hack by renting out rooms or units in a multifamily property. We’ve seen listeners cut housing costs by 50% this way, freeing cash for down payments on rentals or to accelerate their journey to early retirement. Transportation? Drive an economy car—saving thousands annually on payments, insurance, and gas. Controlling food is the simple and repetitive task of making most of your meals, most of the time with healthy food from reasonable grocery stores.
The Trap: Lifestyle creep. That raise or bonus? It vanishes into bigger homes or fancier rides if you’re not vigilant. Only upgrade your core housing, car, or food defaults when your financial portfolio can sustain the increase for a lifetime.
2. Invest for the Long Term: Embrace Low-Fee Index Funds
Flashy stocks and crypto hype dominate headlines, but sustainable wealth comes from boring, consistent investing in low-fee broad-market index funds. These outperform active management 80-90% of the time over decades. Why? They capture market growth without timing pitfalls or high fees eroding returns.
Funds like VTI (total U.S. stock) or VXUS (international) are popular for good reason, having historically offered 7-10% average annual returns for decades. Invest early and often: $500/month at age 25 could grow to over $1 million by 65. This isn’t exciting, but it is core to “getting rich for sure.” Layer in real estate for diversification—index funds provide liquidity and stability while rentals offer inflation-hedged cash flow and tax perks like depreciation.
The Trap: Chasing high-risk, high-reward investing “fads.” If you veer off-script (e.g., a hot REIT), consider creating a formal “investment thesis” in each instance, and tracking your performance vs a benchmark like the S&P 500.
3. Incrementally Improve Every Day: The Power of Consistent Self-Improvement
Career success isn’t a lottery, it’s the byproduct of showing up daily for years, honing skills, networking, and seeking growth. Read industry books, take online courses, or negotiate raises annually. This “daily grind” compounds income, turning a $60K salary into $150K+ over a decade.
We regularly get feedback from listeners looking for a mythical “median income earner” who achieved FIRE in their 40s. They don’t exist. Not because they start rich, but because they finish their careers with higher incomes. The person with a several million dollar portfolio earning $65K a year when they finish is rare indeed.
The Trap: Over-optimizing to burnout. Don’t miss life’s joys chasing perfection—balance with family time and hobbies. Aim for 1% daily improvements like a podcast episode, or chapter of a book rather than 3-4 hours per day.
4. Have a Tax Strategy: Follow the Order of Operations
A good investment approach considers and minimizes lifetime tax burden. For most, the effective sequence is some light modification to the following: Build a 3-6 month emergency fund, max your HSA (triple tax-free for health costs), grab the 401(k) match, fund a Roth IRA, then explore taxable accounts or 529s for kids’ education. This could save thousands yearly, per IRS guidelines, via deferrals, deductions, and growth.
Real estate is also an alternative for those so inclined. Real estate cash flow is often tax advantaged due to benefits like depreciation, (extra powerful for Real Estate Professionals). Many investors find themselves forced with a choice about whether to prioritize real estate or tax advantaged accounts with good arguments on both sides.
The Trap: Hoarding all wealth in illiquid tax shelters. You might lock up funds needed for 30s/40s opportunities like a business opportunity, real estate deal, or simply the chance to take a sabbatical mid-year. Don’t optimize for tax efficiency to the point where you’ve “Trapped” yourself in your day job, with no more than a few months of liquidity after decades of work.
5. Automate What Can Be Automated: Set It and Forget It
Willpower fades, but systems endure. Automate transfers to investments, bills, and savings with every paycheck. Tools like Vanguard’s auto-invest or bank autopay ensure consistency—you’ll never miss a mortgage payment or skip a 401(k) contribution.
The Trap: Blind automation on the expense side. Subscriptions creep, fees pile up, and insurance policies can renew with crazy premium increases for those not paying attention. Review your automations annually (or better, quarterly) and be willing to shop or switch.
6. Track Your Money in Real Time: Knowledge is Power
Blind finance is reckless finance. You can’t play the game of personal finance if you can’t keep score. A real-time scoreboard that shows income, spending, portfolio value, and liabilities/debts is imperative. Apps like Monarch or Empower deliver daily net worth snapshots, expense breakdowns, and projections.
The Trap: Obsessing over uncontrollable components of net worth, like market dips. Focus on inputs (spending, saving) not outputs (stock prices).
7. Take Some Asymmetric Bets: Leverage Your Unfair Advantages
Core principles build stability; asymmetric bets accelerate growth. Allocate 5-10% to low-risk, high-upside plays where you have an edge. Young? House hack for free housing plus equity. Networker? Angel invest in a friend’s startup. Real estate agent spouse? Dive into passive losses via partnerships.
These “bets” offer massive ROI with downside protection—house hacking yields 20%+ returns often. We’ve seen listeners turn side hustles into rental empires.
The Trap: All-in gambles, no matter how promising the opportunity seems. Bias toward vetted, low-risk opportunities with capped downside rather than putting all your chips on black.
Putting It All Together: The Path to Financial Freedom
These principles form a flywheel: Control costs, invest steadily, grow income, optimize taxes, automate, track, and take a few calculated bets that are asymmetric in your specific situation. If you can audit just one principle per week for the next 7 weeks, you can begin a flywheel that will drive you towards long-term, lasting wealth, and likely much faster than you ever thought possible. Financial freedom awaits—not in fads, but fundamentals.
Scott Trench and Mindy Jensen host BiggerPockets Money.
Monarch Money is a sponsor of BiggerPockets Money – use the code POCKETS for 50% off your first year, if you choose to try Monarch as your real-time personal finance tracker.
