Easy Steps to Wealth Building
Simple changes can make a dramatic difference and put you on track to a comfortable retirement. Observing what the wealthy do is very instructive.
Pay off credit every month
It costs a lot of money to carry credit card debt from month to month. If the card is paid off each month, borrowing usually doesn’t cost anything. However, carrying a balance to the next month can cost anywhere from 10% – 20% APR, or even more. A simple rule that the wealthy and wise follow is to pay this debt off in full each and every month. As an extra bonus, it is a good idea to find a credit card that offers rewards that suit your lifestyle such as airline miles.
Contribute max to 401k or IRA
Most businesses that offer a 401k, will also offer a matching program. If you are not contributing enough to take full advantage of the match, then you are leaving free money on the table. The earnings in these accounts grow tax deferred which is valuable tool for retirement savings.
If you don’t have a 401k, then by all means, take advantage of saving in an IRA. By doing this you will also get the advantage of tax deferred earnings until retirement. In 2019, you can contribute as much as $6,000 each year and if you are over 50, you can contribute up to $7,000.
Recent research shows that the wealthy save at least 20% of their income. While it is certainly easy to save money when you earn a lot of money, the most important lesson here is to establish the habit. It is important to have a nest egg for emergencies, goals and for investments. Don’t worry if you can’t save 20% now. Just get in the habit of saving what you can. As your income grows, rather than spending it all, be sure to set aside a little more to increase you savings.
Set Goals and monitor
According to the Rich Habits Institute, 67% of the wealthy write down their goals and over 80% maintain a “To Do list”. It is amazing how much more you can do in a single day just by having a To Do list. Writing down your goals has the same effect; it is a form of accountability. This is especially effective for financial goals and career goals. Often these goals are complimentary.
Have a financial plan and regularly review it
While most of the wealthy have a financial plan, it is a myth to believe that a financial plan is only for the wealthy. Everyone can benefit from having a plan. Short, medium and long term goals can all be combined to create a roadmap to help you achieve your goals. Would you like to save for a home? Provide a college education for children? Determine when you can retire? All these goals can and should be planned for. The most effective plans are reviewed annually and updated with any changes that have occurred during the preceding year. If you don’t have a plan, call a financial advisor and get the process started.
Next……the importance of financial planning