8 Ways to Build Wealth Over Time
You Need Vision, Discipline, and Patience to Achieve Your Financial Goals
Everywhere you look you can find get-rich-quick schemes that promise a shortcut to building wealth for anyone who believes them. Yet, more often than not, these schemes carry significant risk, and most investors who take them on end up losing money rather than making what they were promised. Instead of falling victim to these sorts of promises, focus on building your wealth with traditional, prudent methods. This requires smart wealth management skills, a comprehensive investment strategy, and a long-term mindset.
If you’re ready to be disciplined about building your wealth over time, check out the eight tips below.
Build Wealth Step #1: Make a Plan
Building wealth starts with a vision – and a plan to realize it. Taking the time to identify your goals and map out how you can accomplish them is the first step in building wealth. You want your plan to be comprehensive, considering not just saving and investing, but things like tax planning and estate planning as well. It may be smart to hire a financial advisor who can offer you the resources and knowledge you need to ensure that you’re making the right choices to stay on track towards your larger goals.
Build Wealth Step #2: Create a Budget (And Stick to It!)
It’s rare to find someone who loves budgeting, yet it’s a crucial part of any financial plan, especially if you’re looking to build wealth. Not only does budgeting ensure you’re saving and spending in accordance with your income, but it also provides you the opportunity to see the full scope of your finances so that you have all the knowledge you need when it comes time to make big financial choices.
If you create a budget that accurately reflects how you need to be spending and saving to achieve your financial goals, then you can have peace of mind in knowing you’re on track to carrying out your financial plan – so long as you stick to it.
Build Wealth Step #3: Build an Emergency Fund
We can’t ever fully predict what expenses we’ll have to pay and when. Unexpected expenses come up all the time – and often times they come with quite a hefty price tag. Whether it’s your car breaking down, your furnace going out, or getting let go from your job unexpectedly, you’ll want to have a plan in place to protect you from losing your financial footing. That’s where an emergency fund comes in.
Too often, people depend on their credit cards to bail them out when the unexpected happens, but that’s not smart wealth management. By building an emergency fund, you’re not only protecting your credit, but you can also reap the benefits of interest by having a savings account that goes largely untouched. Not to mention the peace of mind it provides in knowing you’ll be protected in the case of an emergency.
Build Wealth Step #4: Automate Your Finances
Sticking to a budget requires discipline. It can be hard to see all that money in your account after pay day and then manually move it into savings instead of treating yourself to that jacket you’ve been eyeing. Automating your finances can help mitigate that kind of temptation. Reference your budget and have the aggregate amount that you’ve allocated for each expense and goal automatically deducted from your paycheck and applied to each expense. This will also help ensure that you’re paying all of your bills on time, so you don’t incur any late fees.
Build Wealth Step #5: Tackle Your Debt
Debt is one of the biggest threats to your financial stability and future wealth. When it comes to tackling debt, the best course of action is to simply start paying it off. It can be daunting to face a mountain of debt, but the hardest part is getting started. It’s financially savvy to start with whichever loan account or credit card has the highest interest rate, and this is commonly referred to as the avalanche method. However, the best debt pay-off plan is the one that keeps you motivated. Some people start by paying off the smallest balance first in order to achieve early success and this is called the snowball method. Check out this article on the avalanche method versus the snowball method and consider which may be right for you.
Build Wealth Step #6: Invest Heavily in Your Retirement Savings
There are many options available to you when it comes to retirement savings accounts. Whatever options you’re using, the important thing is to make sure you’re taking advantage of as many of them as you can. Invest as much as possible in your employer’s retirement plan alongside your contributions to any individual retirement accounts you might have, too.
If you’re unable to contribute the legal maximum into your accounts, be sure that at the very least you’re putting enough in to get any 401(k) matches your employer may be providing. If you’re only able to contribute a small amount at a time, don’t fret. Thanks to compound interest, even investing small sums over a long timeframe can pay off in the end.
Build Wealth Step #7: Diversify Your Portfolio
The key to success in the markets lies in diversification. The stock market can be unpredictable, and even volatile, and putting all of your investments into only a few options open you up to a significant amount of risk should those stocks not perform in the way you expected. If you diversify your investments, however, and build a portfolio with some non-correlated assets, you mitigate your risk.
Build Wealth Step #8: Take Advantage of Your Raises
If you’re at a place in your career where you’re living comfortably on your income, then consider investing any raises you receive into your future rather than spending them in the present. When managed correctly, a pay raise can be the perfect opportunity to really begin building your wealth. If you can, invest at least half of every raise you receive into your retirement savings. By putting away half, you’re able to gradually improve your lifestyle while also incrementally building your wealth – the best of both worlds.
Building Wealth is a Lifelong Process
Building wealth doesn’t happen overnight, rather, it happens one day at a time, step-by-step. It requires a dynamic perspective of wealth management, smart planning, and the discipline to follow the plan that you create for yourself. At Paces Ferry, our team stays committed to helping our clients construct a comprehensive financial plan that honors their financial reality and works to bring them closer to achieving their financial goals. Contact us today if you’d like to talk with one of our professionals about creating a plan to help you build your wealth.