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Three things that most people want in life are wealth, health, and happiness.
However, simply wanting these things is not enough to possess these things. To possess them, you must develop a strategy to get them and then implement tactics that allow you execute on your strategy.
While strategy and tactics sound similar, they’re quite different.
A strategy is an overarching plan to get what you want. Tactics are the specific actions you’ll take to achieve your strategy.
Without a strategy, you have no direction to move towards. And without tactics, you don’t have the means to move in a specific direction.
Military strategist Sun Tzu once said:
“Strategy without tactics is the slowest route to victory. Tactics without strategy are the noise before defeat.”
No matter what you want in life – whether it’s health, wealth, or happiness – you need both strategy and tactics to get there.
Example: Building Wealth with Strategy and Tactics
Suppose you have a goal to build wealth. This is an excellent goal to pursue because, as angel investor Naval Ravikant once explained, wealth gives you freedom over your time:
“The reason you want wealth is because it buys you your freedom. So, you don’t have to wear a tie like a collar around your neck. So, you don’t have to wake up at 7:00 AM, and rush to work, and sit in commute traffic. So, you don’t have to waste away your entire life grinding all the productive hours away into a soulless job that doesn’t fulfill you.
So, the purpose of wealth is freedom. It’s nothing more than that. It’s not to buy fur coats, or drive Ferraris, or sale yachts, or jet around the world in your Gulfstream. That stuff gets really boring, and really stupid really fast. It’s really just so that you are your own sovereign individual.”
The first step to building wealth is to create a strategy for doing so. However, in order to create a strategy you first have to acquire the right knowledge.
Just be careful not to fall into the common trap of acquiring knowledge without taking action.
A Common Trap: Knowledge Without Action
Thanks to the internet, it’s easy to acquire information. For example, someone who knows nothing about personal finance could learn all of the basics in single weekend just by watching the personal finance videos on Khan Academy.
The hard thing is actually putting that knowledge into action. Many people fall into the trap of thinking they’re making progress simply by consuming information. But without action, information gets you nowhere.
Be wary of becoming someone who learns how to build wealth, but never actually does the necessary things to build wealth.
Creating a Strategy for Building Wealth
To understand how to build wealth, you might read books, watch videos, read personal finance articles, take courses, and listen to podcasts.
I’ll save you some time and let you in on a secret. No matter how many financial books you read or podcasts you listen to, you’ll always come across the same simple path to building wealth:
Spend less than you earn.
Invest the difference.
Repeat until wealthy.
Once you acquire this knowledge, you’re prepared to create a strategy to build wealth. One simple strategy might look like this:
Get your “big three” expenses of housing, transportation, and food under control. By reducing these big three expenses, you allow yourself to save more money.
Acquire a rare skill set and use it to earn a high income. By earning a higher income, you increase the amount of money you’re able to save and invest each year.
Buy and create assets that pay you over and over again. Through buying and creating assets, you are able to own things that earn money for you while you sleep, thus increasing your wealth more and more over time.
Through doing these three things, you can’t help but build wealth over the long haul.
You can think of your strategy as your long-term set of goals and your tactics as the short-term actions you’ll take to march towards those goals.
As Greg McKeown once said in his book Essentialism:
“What is essential is to marry your long-term goals with short-term critical moves.”
Once you have a strategy in place, the next step is to decide on the tactics that you’ll use to execute this strategy.
Deciding on Tactics to Build Wealth
Recall that tactics are the specific actions you’ll take that align with your strategy. Here are some examples of tactics you might use to achieve your strategy:
Strategy: Get your “big three” expenses of housing, transportation, and food under control.
- To reduce housing expenses, recognize that most homes have areas that regularly go unused, which means you should aim to buy or rent a place in which you’ll actually use most of the space. This can prevent you from overspending on housing and can allow you to save a significant amount of money on the largest monthly expense for most American households.
- To reduce transportation expenses, choose to buy a car that suits your needs and not one that you plan on using to impress your peers. As Morgan Housel eloquently explained in The Rich Man in the Car Paradox, buying a car to impress others rarely has the desired effect.
- To reduce food expenses, implement some simple tactics like meal-prepping on Sundays for the week ahead and buying items in bulk for cheaper prices.
Strategy: Acquire a rare skill set and use it to earn a high income.
- Identify a skill set that you have the potential to learn and that the market values. Ideally, if you find something easy that most people find hard, you’ve hit the jackpot. For example, I find statistics concepts to be easy to learn and apply. Most people do not. This makes my knowledge in statistics rare. This is why I’m able to leverage that knowledge to demand $40-50 per hour for stats tutoring.
- Once you decide on a skill to learn, set aside a chunk of time each day or each week to work on it. Over time, you’ll reach a point where you’re proficient enough to earn an income with this skill.
Strategy: Buy and create assets that pay you over and over again.
- Examples of assets you could buy include stocks, bonds, and REITs. If you choose to go this route, either use an employment retirement plan like a 401(k) or a brokerage account you open yourself to set up an automated investment plan that invests a certain amount of money every two weeks or each month into these investments. Over time, increase the amount you invest in these assets.
- Examples of assets you could build include websites and/or products. If you choose to go this route, set aside a certain amount of time each day or each week to work on your website or product. If done correctly and consistently, you should be able to monetize your website and/or product and eventually earn income from it.
Strategy & Tactics: You Need Both
You need strategy and tactics to get what you want in life. One without the other will not work.
American writer and businessman Alvin Toffler once said:
“If you don’t have a strategy, you are part of someone else’s strategy.”
Greg McKeown said something similar in his book Essentialism:
“Remember that if you don’t prioritize your life someone else will.”
If you don’t create a strategy, you’ll fail to get the things you want in life. Worse still, you’ll spend your time being part of someone else’s strategy whose goals might not line up with yours. And if you don’t decide on tactics to use, your strategy will be useless.
I personally set up a very specific strategy and a set of tactics to implement when I decided that I could no longer stand my day job.
My goal was to quit my day job.
My strategy was to earn enough income online that I no longer needed a day job.
My tactics I used to execute this strategy included:
- Learning SEO
- Learning how to monetize websites
- Setting aside ~2 hours each morning to write articles for my websites before driving to work
By sticking with these tactics consistently for nearly three years, I was able to build up my income to a point where I could quit my day job.
Whether you want to quit your day job, build a profitable website, improve your fitness, or anything else, setting up a strategy and a set of tactics makes the path much easier and your goals more achievable.
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- The Road to My First $7,000/Month in Online Income - July 1, 2020
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