No matter which way you look at it, wealth building is a heated topic. On one side of the spectrum, you’ll find people promoting risky get rich schemes; on the other side, you’ll hear the overly conservative opinions.
With the diverse opinions surrounding wealth, it’s no surprise that many people tend to find the concept confusing. But in reality, building wealth is much more straightforward than you may think.
No matter what stage of life you’re at, growing your net worth boils down to three steps:
- Make money. Before you can save or invest, you’ll need to have a long-term source — or sources — of income enough to have some money left over after you’ve paid necessary expenses and debts.
- Save money. Once you’re earning an income that’s enough for your goals, you’ll need to save money.
- Invest money. Besides saving, you’re also going to need to invest to make your money work for you.
When you think of wealth building as making, saving, and investing money, things are simple. Today, we’re going to break down these steps that you can take to build wealth and who to turn to when you need help. Check out the article below.
Assess Your Savings Goals
The savings goals of a 25-year-old fresh out of college will be different from the goals of a 60-year-old planning to retire in five years. Either way, you must occasionally reassess your savings goals to help you stay on track. Here are a few common goals most people aspire towards:
- A financial safety net
- Financial independence
- Extra income each month
- Comfortable retirement savings.
Once you’ve set goals appropriate to where you are in life, you can figure out:
- How long you have left to reach your goals
- How much you need to save
- How risky — or conservative — your investments should be
Build Your Savings
If you haven’t already started investing, you should take a step back and begin with your savings. Many institutions require a minimum initial investment — usually between $1,000 to $10,000.
Before you have the initial investment amount, you can still use compound interest by building your savings in a high-interest savings account. These accounts typically offer interest rates between one percent and two percent.
Learn About Investing
If your parents didn’t invest and you didn’t grow up learning about investing, it can be scary to start. There are many options to choose from, and there is no one-size-fits-all recommendation. So, it would be wise to learn more about investing in general before making any moves of your own.
Make Steady Progress
As with the tortoise and the hair, steady wins the race. If you can’t invest enormous amounts each month, invest as much as you can — within your budget. Investing lesser amounts consistently is better than investing nothing at all.
Building Wealth Close to Retirement
If you’re part of the 53% of baby boomers who have no retirement savings, time is not on your side. Luckily, you still have many opportunities to play catch-up.
Some catch-up options include:
- Annual Catch-up Contributions. If you’re 50 or older, you’re allowed to invest more money than usual in your Roth IRA each year. The same provision applies to your company’s 401(k) plan.
- Reassess Your Lifestyle. We all want to retire comfortably. For some, this may mean spending your days drinking champagne on a boat. But if you’re playing catch-up, you’ll need to be more realistic. Think about ways you can cut your expenses so that you can put more money toward retirement.
- Health Insurance. As we grow older, our bodies don’t function as well as the well-oiled machines they once were. The likelihood of needing medical care increases as you age, so you’ll want to keep basic medical insurance coverage. One significant — and costly — health crisis could set you back financially and completely change your retirement calendar.
- Social Security. As you approach your late 50s, you may also want to start thinking about how you want to approach Social Security. If you’d like to, you can claim retirement benefits as early as 62; however, delaying your claim will increase your monthly benefits. If you can wait until full retirement age, you’ll receive more money per month.
Work With a Financial Advisor
Like how a firefighter puts out flames, a financial advisor can extinguish the “financial fires” in your life and keep you on course.
You can enjoy the help of a financial advisor at any stage of your life. But their expertise becomes even more critical when you’re close to transitioning into retirement. Specifically, a financial planner can be tremendously beneficial to you if:
- You’re investing substantial amounts of money.
- Your goals or income have changed dramatically.
- You’re close to retiring and want to still have money to pay for your children’s education.
- You’d like to transition to living off of investment income rather than salary or wages.
Contact Us Today
Whether we like it or not, wealth plays a significant role in our lives. So, it would be wise to manage your wealth with the help of a trusted financial planner from Maplewood Financial Group. We’re a Pennsylvania-based financial firm specializing in all aspects of financial planning, such as estate planning, retirement planning, business finances, and more.
Take the first step toward meeting your short- and long-term goals by contacting us today. With over 20 years of knowledge and experience under our belt, we serve as unbiased advocates for you and your family’s best interests.
About Kenneth Christian:
Kenneth has over 20 year’s experience as a financial advisor and wealth manager helping clients nearing retirement, in retirement, clients going through a transition, and working with business owners. He works with clients virtually all over the United States.
Caldwell, M. (2020, March 20). Want to Be Wealthy? 5 Steps to Start Building Wealth. The Balance. https://www.thebalance.com/how-do-i-begin-to-build-wealth-2386145
Hogan, C. (2020, October 21). How to Build Wealth at Any Age. Daveramsey.Com. https://www.daveramsey.com/blog/how-to-build-wealth
Investopedia. (2019, November 30). 3 Simple Steps to Building Wealth. https://www.investopedia.com/managing-wealth/simple-steps-building-wealth/