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 make 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 even realize you are on it.

However, if there is a certain route that can make that journey faster, while maintaining consistency and smoothness, that’s nothing to sneeze at. And I have stumbled on just such a strategy to help build wealth fast — the right way.

Like many things in life, it began as trial and error. That is the beautiful thing about personal finance: there is not one right way to do things. 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 exist. But you won’t find many exact hard and fast rules of wealth building — at least ones that actually work.

Because of this, after my wife Selenid and I first crafted a written financial plan and started our real life jobs as a professor and attending surgeon, respectively, we decided to create a savings rate that would suit us — 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. And the question now was: How should we divide 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 three 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 toward paying off debt

- 1/3 would go toward investments in stocks and bonds

- 1/3 would go toward 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 toward 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 toward 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 toward 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

- 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 passively in your portfolio as well!

Why did this end up helping us build wealth fast?

Look, this is level V evidence based on one person’s experience. But the proof is in the pudding, as you can see from the trend of my net worth.

Now, I can’t for sure say that some other strategy would not have built my wealth faster than this. You will notice that real estate certainly is the fastest growing component of my portfolio. It is certainly possible that if I just invested everything in cash-flowing real estate 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 what is spit out is something that 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 necessarily great all by themselves. But put them all together? 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 one 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 toward index funds, with an adjustment to contribute toward 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 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 inertia you need in the beginning. And after that, it becomes self-sustaining!

What rules do you follow to build wealth fast? Share in the comments!

Jordan Frey, MD is a plastic surgeon in Buffalo, NY at Erie County Medical Center and the University of Buffalo. His clinical focus is on breast reconstruction and complex microsurgery. He is also the founder of The Prudent Plastic Surgeon, one of the fastest growing finance blogs. There, he shares his journey to financial well-being with a goal of helping all physicians reach financial freedom, practicing on their own terms.