What I have learned over the years — and what would have been extremely valuable to understand at the very beginning — is that investing is not the starting point. It is a step within a process that begins much earlier.

Investing means putting capital to work with a purpose.

Within this short sentence lie two fundamental concepts that determine whether investing becomes a successful strategy or a failure from the outset: capital and purpose.

The Key Foundations

The Prerequisite: Earning

Capital is something we can work with and grow through investing. But investing does not create capital if the starting capital is zero.

Investing, therefore, requires initial capital. The key question becomes: how much do I need to get started?

There is no universal answer to this question. As in many other areas of life, the only honest answer is: it depends. It depends on who we are, our goals, our background, the context we live in (both historical and personal), and many other variables.

However, there is one constant that applies across all these variables — except in the rare case where you have inherited a substantial sum: work.

Work generates income, and income allows us to build capital — the conditio sine qua non of investing. This is the first piece of the puzzle: earning.

Once we have a more or less stable income stream, however, we must learn how to manage it. The process through which we manage our income is planning, and the ultimate goal of that management is saving. At this point, we introduce two new essential concepts.

first piece of the puzzle: earning.

Once we have a more or less stable income stream, however, we must learn how to manage it. The process through which we manage our income is planning, and the ultimate goal of that management is saving. At this point, we introduce two new essential concepts.

Financial Planning: Setting Goals Is the First Step to Achieving Them

Planning means creating a structured plan or program designed to organize the management of the resources at our disposal. In this case, the resource is money — the tool that enables us to reach the objectives we have set for ourselves.

To plan any activity effectively, we must first be clear about the goals we want to achieve. Without goals, we navigate blindly.

Goal setting can be entirely discretionary, both in terms of structure and time horizon. Some suggest dividing goals solely based on time horizon — short, medium, and long term.

Personally — and we will explore this more in future articles — I prefer to create a structured matrix. I manage goals not only according to time horizon (short, medium, and long term), but also by level of difficulty:

• Low challenge
• Moderately challenging
• Highly ambitious

This framework simplifies the financial planning phase and, consequently, the saving and investing stages. It helps me decide how much to allocate and how to structure investments for each specific goal.

Proper Financial Planning

Once goals have been clearly defined, we can move to the actual financial planning phase by preparing:

• A household budget
• Our Financial Needs Pyramid

The Household Budget

Creating a household budget initially means writing down (whether on paper or in the magic world of Excel) how much money comes in and how much goes out each month.

Once we become comfortable with the tool, we can shift to a forecasting approach — defining expected income and expenses for the upcoming month. This allows us to:

• Track and monitor our financial behavior
• Control impulsive spending

When we know that only a specific portion of household income has been allocated to certain activities, it becomes easier to stay disciplined.

“Do not save what is left after spending, but spend what is left after saving.”
— Warren Buffett

This principle means that, when planning our monthly budget, we must first allocate:

1. The amount necessary to reach our financial goals
2. The amount required to maintain our household’s standard of living (mortgage/rent, utilities, essential goods, etc.)

What remains is what we can afford to spend on discretionary or non-essential expenses during the month.

One rule I personally apply is the 50/30/20 rule by Elizabeth Warren, which I will explore in a dedicated article.

Here we introduce the third key concept: saving.

The Financial Needs Pyramid

The Financial Needs Pyramid is composed of six levels, each representing a specific need that must be managed in order to protect ourselves while steadily increasing our savings.

The six levels are:

1. Liquidity

Plan your income and generate or increase your cash flows, which depend primarily on your work activity.

2. Protection

Insure yourself against personal damages, liability toward third parties, or property-related risks.

3. Savings

Build a financial reserve to handle unexpected financial risks (replacing a broken car, major appliance purchases, or other significant expenses).

4. Retirement Planning

Supplement your future pension through private retirement plans or financial products that reduce the income gap between working years and retirement (for example, through systematic investment plans).

5. Investments

Plan medium- to long-term goals and allocate a portion of your savings toward achieving them.

6. Extra Return

Allocate a marginal portion of your wealth to higher-risk, potentially higher-return investments (cryptocurrencies, individual stocks, private equity, real estate crowdfunding, etc.).

To explore this topic in greater depth, I have dedicated a full article to the Financial Needs Pyramid, which you can find here:
Planning Using the Financial Needs Pyramid

Saving: A Definition Connected to Financial Planning

As discussed in the previous section, saving is not what remains after spending — it is what we consciously decide to set aside for future needs.

The first definition of “saving” in the Cambridge dictionary describes it as refraining from using or consuming something one possesses, or limiting its use for various reasons or purposes.

Personally, rather than speaking about refraining, I would speak about shifting consumption over time.

When I save today, it is in order to spend more tomorrow.

Saving should not be viewed as a sacrifice (a negative concept), but as an investment in the future (a positive concept). This mindset transforms saving from a burden into an opportunity — something to leverage in the future. It becomes like building a house, brick by brick, in which our future self will eventually live.

However, there is an immediate risk: sacrificing too much in the present for the sake of the future.

If there is one thing I learned from practicing sports for many years, it is that performance does not improve by destroying your body in a single intense workout once a month. It improves through consistent daily effort.

The same principle applies to personal finance.

If I were to redefine saving from a personal finance perspective, I would describe it as:

Consistently setting money aside with a future-oriented mindset.

“If you add a little to a little, and do this often, soon that little will become great.”
— Hesiod

This is the true bridge between financial planning and investing: disciplined, consistent saving that transforms small actions today into financial freedom tomorrow.

Investing as the Final Piece of the Process

The process concludes with investing.

The four stages, therefore, are:

Earn → Plan → Save → Invest

What I once believed to be the starting point is, in reality, the final step.

But is it truly the final step?

To explore this idea, I will borrow the well-known Deming Cycle and apply a bit of simplified theory to the topic.

For those unfamiliar with it, the Deming Cycle — also known as the PDCA Cycle (Plan – Do – Check – Act) — is an iterative process developed in Japan in the 1950s by engineer William Edwards Deming, who later gave the model his name.

The purpose of this framework is to continuously improve production processes (a philosophy known as Kaizen) through four interconnected stages:

• Plan
• Do
• Check
• Act

Each phase is inseparably linked to the others. Every stage depends on the previous one and feeds into the next, creating a continuous improvement loop rather than a linear path.

So what does this have to do with the process of earning, financial planning, saving, and investing discussed so far?

At first glance, they may seem unrelated. But in reality, personal finance follows the exact same logic.

Earning allows you to plan.
Planning enables you to save.
Saving creates the capital needed to invest.

And investing, in turn, generates results that must be monitored, evaluated, and adjusted — bringing you back to planning.

Investing, therefore, is not the end of the journey. It is the beginning of a new cycle.

Your investments will produce outcomes. Those outcomes will require evaluation. That evaluation will lead to adjustments in your plan. And those adjustments will influence how you earn, save, and invest moving forward.

In other words, personal finance is not a straight line — it is a continuous improvement process.

And that is perhaps the most important lesson of all:
Financial growth does not come from a single brilliant decision, but from a structured system repeated and refined over time.

The EPSI Cycle

Financial Planning: Earn – Plan – Save – Invest

A picture is worth a thousand words.

In practical terms, I redesigned the PDCA cycle by replacing its four stages — Plan, Do, Check, Act — with the four foundational phases of any solid personal finance process:

Earn – Plan – Save – Invest

Or, if we want to give it a more structured name: the EPSI Cycle.

The circular representation of these phases is intentional. Each stage depends on the previous one and simultaneously fuels the next.

• You earn to create financial capacity.
• You plan to give direction to your money.
• You save to build capital.
• You invest to grow that capital.

And once you invest, the results you obtain influence how you plan, how much you save, and even how you approach earning in the future.

Just like the PDCA framework, the goal of the EPSI cycle is continuous improvement.

However, in this case, the improvement does not concern manufacturing processes or corporate efficiency. It concerns the quality of the financial decisions we make throughout our lives — decisions that aim to enhance, brick after brick, our present and future well-being, as well as that of our families.

From my personal perspective, applying this structured process earlier in my life would have prevented several poor financial choices. With the benefit of hindsight, I would likely be closer today to achieving my personal goals than I currently am.

But that is precisely the point of awareness.

Once you understand that personal finance is a cyclical system — not a series of isolated actions — you stop reacting emotionally and start acting strategically.

And strategy, over time, compounds just like capital.

DISCLAIMER
I am not a financial advisor, but an individual investor sharing my personal journey. This article is for educational purposes only. Past performance does not guarantee future returns. Taxes, fees, and investment outcomes may differ from historical data. Carefully consider your personal situation, risk tolerance, and financial goals. If in doubt, consult a qualified professional.