Your goal is not to build wealth fast. Let me lay that out right from the start. That is how people get into trouble and go head over feet. It's what leads investors to take unnecessary risks and get into speculative investments or investing strategies. All things that will not only not help you build wealth fast, but will actually help you lose wealth.

Your goal is to build wealth smoothly and consistently, constantly progressing on the path to financial freedom. The path ideally is so smooth that you don't always realize you're actually on it.

However, if there is a certain path that can make that journey faster, while maintaining consistency and smoothness, that's nothing to sneeze at.

And I think I may have stumbled on just such a strategy to help build wealth fast – the right way…

The funny thing is that I didn't even realize what I had for a long time…

Mainly because, like many things in life, it began as trial and error. And that is the beautiful thing about personal finance: there is no one right way to do it.

There sure are wrong ways to do it.

But there are many, many right ways. So every journey and path to FIRE is individualized and should be crafted just for you and your loved ones.

As a result, general guidelines for building wealth – like these – exist. But you won't find many exact, hard and fast rules of wealth building – at least ones that actually work.

And because of this, after Selenid and I first crafted a written financial plan and started our real life jobs as a professor and attending surgeon respectively, we created a savings rate of about 40%.

But then we had a decision to make. The formula to build wealth (at any rate) is to increase and invest the margin between what we earned and what we spent. We had increased the margin and built a savings rate. But now we needed to invest it.

And the question remained, how should we dive up this monthly savings rate and invest it?

We knew all of the basic options available to us to build our wealth. We could:

• Pay off debt
• Invest in index funds of stocks and bonds
• Buy cash-flowing real estate properties

Actually, once we distilled everything down, these seemed like the best and most reliable methods for us to build our wealth.

But still, how would we divvy up our monthly savings rate among these 3 options? Well, from this conundrum arose…

The 1/3 rule that helped us build our wealth fast

In an effort to avoid analysis paralysis, Selenid and I made this decision as simple as possible:

Each month, we would take our savings rate and split it into thirds. Approximately,

• 1/3 of the savings rate would go towards paying off debt,
• 1/3 would go towards investments in stocks and bonds, and
• 1/3 would go towards buying cash-flowing real estate properties

It was easy and it adhered to our keep it simple, stupid life philosophy.

And here is how it worked out in practice

For the 1/3 going towards paying off debt:

• We did this in a “snowball” type fashion
• The debt with the highest interest rate got paid off first. If 1/3 of our monthly savings rate covered all of the debt with the highest rate then we paid off some of the debt with the next highest rate. And so on and so on…

For the 1/3 going towards index funds of stocks and bonds:

• Contributions were made according to our chosen asset allocation across all investment accounts
• We contributed monthly to maximize our 403b and 457 retirement accounts
• After a few years, we also contributed to both of our backdoor Roth IRA accounts
• Anything remaining of these savings went into a taxable investment account

And for the 1/3 going towards buying cash-flowing real estate properties:

• We saved up this money in a savings account until we had enough for a down payment on a cash-flowing rental property (This is how we screen and analyze properties to see if they make good investments…)
• Once we had enough and bought a property, we kept saving this money every month (along with rental profits) for the next property
• Now, this is important. Don't write this off just because you don't want to actively invest in real estate. You can invest in real estate here passively in your portfolio as well! More on that here.

Why did this end up helping us build wealth fast?

Look, this is level V evidence based on one person's experience – me. But the proof is in the pudding as you can see from the trend of my net worth which I share here.

Now I can't for sure say that some other strategy would not have built my wealth faster than this. You will notice from the net worth calculations that real estate certainly is the fastest growing component of my portfolio. It is certainly possible that if I just invested all in cash flowing real estate that I would have more wealth now…

But that just would not have worked for me. That is too high risk. And I think it is for most investors.

And therein lies the beauty of this 1/3 rule. It combines strategies of different risks and rewards. It diversifies the possible floors and ceilings of various investments. And the output possesses the best of all worlds while minimizing risk.

Let's take a look at each component strategy

Paying off debt:

• Guaranteed ceiling (you are guaranteed a return equal to the interest rate on the debt you pay off)
• Floor however is equal to the ceiling (no possibility of higher returns)
• Low to moderate reward, lowest risk

Investing in stock and bond index funds:

• Stable long term returns
• Diversification across entire market limits opportunity for massive gains but minimizes risk of massive losses
• Historical long term trends upward
• Moderate reward, low to low-moderate risk

Investing in cash-flowing real estate properties:

• Higher price entry
• Outcomes dependent on management efficiency and efficacy
• Requires self education
• Opportunity for high gains or complete/near-complete loss
• High rewards, moderate to high risk

Each of these strategies on their own possess limitations that would not make them necessary great all by themselves. But put them all together? And suddenly, we have a diversified and non-correlated portfolio consisting of complementary elements that simultaneously ballasts and propels forward your portfolio in just the right amount. In theory, we are maintaining good consistency and control while also providing accelerated returns.

And yet the 1/3 rule is not forever

Selenid and I no longer follow the 1/3 rule. Because it is not designed to last forever.

We have since eliminated most of our debt (I am still waiting on 1 more payment for PSLF to clear the rest of my student debt).

Further, our real estate portfolio is pretty self sustaining at this point. We don't need to contribute more money to it to save up for a down payment. We can just save our monthly profits if we want.

As a result, more and more of our monthly savings rate from our W2 income goes towards index funds with an adjustment to contribute towards real estate now and again as needed.

And the biggest added benefit is that we could actually lower our savings rate a bit and spend more of our money intentionally on experiences and things that bring us great joy!

So, who is the 1/3 rule for? Will it help you build your wealth fast(er)?

The 1/3 rule is a perfect starting point for anyone looking to start building wealth.

Whether you are the resident looking to start early, the fellow who just finished training and is starting as an attending, or even a mid career or late career doctor looking to get your financial house back in order, the 1/3 rule can help you build wealth.

After it helps you get started on your path, it is built to get discarded along the way. Think of it as the push you got from your parents when you first rode your bike. It will give you that momentum you need in the beginning. And after that, it becomes self sustaining!

And these resources will help you optimize each component of your own personal 1/3 rule investing strategy – debt pay down, stock and bond investing, as well as real estate investing:

• At What Interest Rate Should You Invest Instead of Paying Off Debt?
• Stress Free Stock Market Investing Is Easier Than It Seems!
• A Real Estate Investing Guide for Physicians

Want all of this information condensed down into its most actionable format? Check out my best-selling book, Money Matters in Medicine!

What do you think? How do you split up your savings rate to invest? Is debt pay down a priority for you? Could the 1/3 rule help you? Why or why not? Let me know in the comments below!