How to Utilize the 5 Pillars to Revolutionize Your Finances


Did you know that if you protect your assets, minimize your debt, and save for your future, your finances have the majority of what they need to thrive?

And more often than not, your financial health rests on how well you utilize the five pillars of personal finance.

The good news?

With time, this skill can be learned. We’re going to tackle it as community. Hopefully, we can get your finances thriving and propel you toward your goals.

Sound good?

So, what is a pillar anyway? defines a pillar as:

a firm upright support for a superstructure

Pillars are vertical columns, known for their integrity.

Although they can be used as decor, ancient Romans primarily used them as structural elements, to support beams or arches that hold up the upper parts of buildings, walls, or ceilings. The shape and strength of columns allow architectures and engineers to create larger rooms because they don’t need to add walls to support the roof.

Amazingly, these magnificent structures can still be found standing on sites of some ancient ruins, after a thousand years or so, further attesting to their durability. Interestingly, your finances are built on pillars as well. If nurtured, they can:

  • Transform your financial condition
  • Grow your net worth

So, what are these pillars?

Behold, the Five Pillars of Personal Finance

The five pillars of personal finance are: income, debt management, assets, investment, and risk management.

Pretty straight forward, right? It can be, but it can also be challenging when navigating through practically. For example, should you abandon investing to take care of debt? Or how much is sufficient for risk management? We’ll explore these questions and other ways to maximize your efforts, increase your assets, and transform your financial condition.

But first, let’s see what each column consists of.

Pillar #1: Income, or Inflow

The first pillar is your income, or inflow. Your inflow is the money that comes in. (You could have guessed it, right?) It’s usually associated with your paycheck.

But it’s much more than that.

Inflow can be money from stocks you’ve sold, pension, or support raising (if you’re in ministry). It can be gold, comic books, or even trading cards.

Yes, Pokemon cards can be considered inflow. Basically, however you’re being compensated (if you can turn it into cash), it can be considered income.

Pillar #2: Debt Management

Debt is any money borrowed that must be paid back, based on terms and agreement made with the lender.

Examples of common debts are: car loans, credit card debt, student loans, mortgage, etc. Debt can be a good thing in certain, rare situations (if controlled). But most of the time, it’s just not good.


First off, it limits your options as to what you can do — especially the things you want and love to do, but are not necessity. It also decreases the value of your assets and net worth (see pillar #3).

Pillar #3: Assets

When we talk about assets, we’re not just referring to accumulated wealth like cars, house, savings, cash, stocks, livestock, real estate, etc. We’re also talking about resources you own that can be converted into money. For example, education, time, and talent.

Your confidence can even be an asset because it can land you positions with higher wages and lead you to ask for raises (pillar #1).

Don’t limit this pillar to just material belongings! Chances are, if it has economic value and you own it, it’s one of your assets.

Pillar #4: Investment

Investing is the process of growing your net worth. It’s not just limited to trading stocks and mutual funds or buying real state and/or starting a business.

Anytime you engage in an activity that adds value to your finances, you’re investing.

For example, regularly paying yourself, maintaining and following a budget, or continually sharpening yourself to stay marketable in your field can be an investment.

The fact is, whether you invest in increasing your income, becoming more frugal, or protecting your assets… At the end of the day, they all position you for future profit and produce increase in your net worth.

Pillar #5: Risk Management

Risk management is a protection plan to insure assets from losses. It doesn’t just protect your accumulated wealth. Risk management also includes mitigating losses to your net worth as a whole, which includes your inflow, assets, and investments (see pillar #3).

Examples of protection plans are:

  1. Emergency savings account — In the case of job loss or an emergency that would prevent you from maintaining consistent inflow/income.
  2. Insurance coverage — Life, auto, home, health, disability, property, etc.
  3. Identity theft protection — Mitigation for your assets, net worth, and more.

 Here’s the One Key You Need to Succeed…

So, how do you utilize the five pillars to maximize your efforts, increase your assets, minimize debt, and transform your financial condition?

Related Article: 5 Underused Tools That Can Help Manage Your Money Like a Pro

Well, the first step is knowing how much you have and where it’s going. This process is called managing. And we want to do it with excellence.

Here is why…

Managing your money gives you control over your financial activities. The better you can manage your money, the more likely you are to succeed. If you can control the activities of your finances, you can direct your money where you want it to go.

Think of it like this…

Your personal finances are like a large company with five separate divisions working together as a single entity. The pillars represent the five divisions. Managing represents the corporate office, of which YOU are the CEO.

Corporate is where resources, initiatives, and support flow from, into the rest of the divisions (the pillars). Corporate is also in charge of determining the amount of time, energy, and resources that will be invested, and into which pillar.

So you really can’t utilize the five pillars effectively without this one key: managing your money. The better you can distribute resources and support to each pillar, the better your financial health.

And here is the best part…

You are managing right now, in the present. But your management affects the past, shapes the present, and addresses the future. Pretty cool, huh?!

Using the Five Pillars to Maximize Your Efforts

But how does this work practically, you ask? Here is a step-by-step process to walk you through:

1. Put your income to work for you

There are two ways you can utilize your income to realize the maximum value:

Grow your inflow! If you constantly come short in covering your expenses, it’s time to look into other ways to increasing your income. Consider your talent and time, how can you use it to bring additional income? If you’re unable to increase your inflow because your schedule is already full or you lack the necessary skills or ideas, consider option number two.

Decrease your expenses! What if you don’t have the time or the skill set needed to increase your income? Learn the art of frugal living. Look through your expenses and see where you can decrease your outflow. This will set you up to address pillar #2.

2. Attack your debt with vengeance! 

Becoming debt-free is probably one of the most noticeable transformations you will experience in your finances.

It’ll free up extra funds to do the things you enjoy, take care of the majority of your present struggles, and position your money to be used to the fullest by enabling you to do productive things like increasing your rainy day fund.

Not only that, but eliminating or significantly decreasing your debt will better position you for future investment opportunities as well.

So don’t just manage your debt- pay it off, and quickly!

Choose to use the money you were able to carve out (by diminishing your expenses) or generate (by finding another source of income) to pay off your debt as soon as possible.

3. Protect your assets with a risk management plan

Perhaps one of the most important of the five pillars of personal finance is risk management. Ironically, it’s the most overlooked.

It’s crucial because it not only protects your current assets, but your ability to produce increase as well. No matter how much you have (monetary or skill set), find a way to insure it!

You can beef up your protection plan by saving up for emergencies. In addition, shop around for the best coverage for your budget.

As you pay off your debt, continue to lower risk mitigation to your assets.

4. Maintain the value of your assets

If your assets are a special skill or talent, invest into it, develop it, monetize it! If it’s education, use it. Market yourself — emphasize the value of your education and see to it that you are compensated accordingly.

If your assets are property, like a car or house, keep up with maintenance to keep its value (at least for as long as you can). In the case of a house, complete projects that will increase its value.

If you have cash, have it work for you.

Letting cash sit will cause it to lose some of its value, due to inflation. Even if you put it in a high yielding savings account, it’s better than having it in a regular savings account.

5. Grow your money

Growing your assets propels you to reach your financial goals even faster. It will protect you from borrowing, inflation, and a delayed retirement. Here are a few things you can do to reap future benefits:

  1. Utilize available cash to decrease your mortgage
  2. Pursue a business venture (buy or start one)
  3. Invest into personal growth, your talent, and education

Whatever you do, always invest!

The five pillars of personal finance play a tremendous role in the condition of your finances and the completion of your financial goals.

Trying to manage finances without giving them a thought in your strategy is like trying to build a house without a foundation.

It’s an empty effort, wasted resources, and a recipe for frustration. Utilize these pillars to maximize your efforts and transform your financial state.

What’s your take?

What do you think of the pillars of personal finance?

Is there is one element you would have included (savings, for example). And why?

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  1. Ty @ Get Rich Quickish August 24, 2016

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