With years of being a high-income earner, accumulating wealth should be easy right? As it turns out, that is not always the case.
Wealth is a measurement of net worth, which is everything you own (assets) minus your debt (liabilities). An expert recommends you should not have debt of more than 15-33% of your net worth at any given time. As with most financial goals, there are required steps to building wealth.
The first step is to create a plan. This starts with setting clear objectives of what you want to accomplish. One good target is to follow a debt repayment strategy to pay off debt as soon as possible. Equally as important, think about how money has an impact on your life and future family needs. Being prepared for life’s twists and turns financially is crucial to building wealth.
Next comes crunching the numbers and creating a budget to follow. Think about cashflow in and cashflow out. A good idea is to periodically review this to make sure you’re on track. This gives you the ability to adjust when life throws you a curveball!
Remember to create an emergency fund. Whether it’s a new set of tires, supporting a family member, unexpected expenses can pile up at any moment. Being prepared for these things will remove the stress and uncertainty of success or failure.
Another step to follow is saving and investing as much as possible during your first 10 years of working. Saving & investing a minimum of 20% of your gross income will put you in a great position to build wealth.
Be mindful that there are many savings & investing vehicles available. Some of these include: 401(k), 403(b), brokerage account, high-yield savings account and more. Think about what your needs are and when your want to use the money.
Regarding investments, there are several ways to accumulate wealth. Start by researching investment strategies based on your comfort level of risk. It’s a very important point to match your investments with your financial objectives. The best way to do so is to stick to a plan and not act based on emotions.
A strong investor systematically contributes to their portfolio and increases the amount as more money becomes available.
Remember, if you feel like you don’t have the time or expertise to follow some of these steps, contact a financial advisor. They can help you create and stick to a plan that will help you accomplish your financial needs and objectives.
Sources:
4907133RLB_Aug24