Dan Lok’s Wealth Triangle: The Three Steps to Wealth

Dan Lok is a Chinese-Canadian entrepreneur and business mentor, and one of his ideas is of the Wealth Triangle. It consists of three sequential pillars for someone to follow in their journey towards financial confidence and freedom.

Here they are:

1. High-Income Skills

Learn a skill that has the potential to make you over $10,000/month or $100,000/year. Lok’s idea is if you’re going to trade your time for money, you may as well trade your time for a high amount of money. A high income skill could be in anything, and includes copywriting, sales, consulting, and social media marketing.

This was a large reason why I chose to learn sales in a commission-only compensation structure – it would give me the motivation to up-level my skills as quickly as possible, while being rewarded handsomely for any success. I’m happy to say that I reached and ticked off this pillar on the wealth triangle after two years of learning and applying sales skills.

The ideal here is to develop more than one high-income skill and bring them together to create even more confidence in your earning power.

If you’re not already practicing a high-income skill and you’re unhappy with your financial situation, this is where Lok suggests you start.

2. Scalable Business

So what happens when you’re already earning five figures a month and you’re ready to go to the next level? Lok’s next pillar is to create a scalable business. Not all businesses apply to this – Lok recommends avoiding businesses like restaurants that create lots of overhead costs or infrastructure. Scalable businesses leverage other people, systems and technology in order to create income from other people’s work. The idea of scalable business is to create cashflow in addition to your income.

In the industry I work in, I was able to start up a team of salespeople in order to leverage their skills instead of only relying on my own sales for income. This involved plenty of training, running sales meetings, and holding progress reviews. It’s definitely more of a challenge that just being responsible for yourself, but it can be more fulfilling if you bring a team along to succeed with you. The reason why it’s scalable is that the team can grow and the more experienced sales reps can become managers who recruit more reps too. The top sales managers in the industry I work earn millions per year.

However, Lok highlights that not everyone is cut out to start a scalable business. There can be risks of losing money, or carrying debt. It can be stressful. According to Lok, creating a scalable business is not essential for building wealth, and it is possible to become a multi-millionaire just from a mixture of high-income skill and the third pillar.

Lok reminds us that as we move onto building a scalable business, it’s important to skill be working on our high-income skill and generating income that way. If you’re just starting off with a scalable business, it’s unlikely that it will be immediately making more than your six-figure income, so keep utilizing your high-income skills to have the confidence of paying yourself, no matter what happens in your business. In my case, that meant going out and making my own sales while also managing other salespeople.

3. High-Return Investments

Lok defines a high-return investment as an investment that provides at least a 10 percent annual return, year in and year out. This is the best way to build your net-worth after you have at least developed your high-income skill. One example Lok gives of a high-return investment is real estate.

As good as a 10% annual return sounds, Lok recommends thinking more strategically – would this money get a better rate of return if I invested it into myself in training a high-income skill, or if I invested it in marketing for my scalable business? In my own life, I took advantage of reinvesting my money hundreds of times over into matched betting, a high-income skill I learned in 2015. At the time, I was saving for a trip to New Zealand and within six months of starting this “high-income skill”, I had earned over £15,000 for my trip, and actually started earning more through betting than I did with my regular job at the time. If I had instead put the savings I made from my low-wage job into a 10% investment vehicle, I would have come away with a tiny amount in comparison. The matched betting provided me with 500+% return, although I did have to spend time actively betting on my laptop.

Lok says that if you master the high-income skill portion of the Wealth Triangle, and invest it wisely, you can create a million dollar net worth in seven to 15 years if you’re able to keep your expenses in check.

The biggest reminder of the Wealth Triangle is that it is supposed to be used sequentially. Lots of people think about investing and starting businesses when they haven’t even harnessed any of their earning power yet. According to Lok, if you’re earning less than $10,000/month, hitting this consistently should be the main focus if your target is wealth. Trading your time for high dollars gives you a foundation that you can then move onto the second and third pillars. Sinking all your life savings into a business idea, like we see on Dragons’ Den, is a result of these entrepreneurs skipping the first stage of building up their high-income skills. When the Dragons inevitably say no, they are emotionally and financially bankrupt.

In summary: Build up a high-income skill, then work on a scalable business to create cashflow, and then invest in something with high returns to expand your net worth.

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dongminglau

British-born Chinese guy who wants to inspire and help others by sharing wisdom and learning through one's own experiences. Main interests are health and fitness, psychology, sales and sports.

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