Building wealth is not only for the wealthy. Anyone can learn how to develop a plan to build a nest egg for retirement. From monitoring daily spending to diversifying investments, these tips and tricks can help you become more financially secure.
Simple Steps to Building Wealth
1) Track your Spending Habits
No matter how busy you are, it’s a good idea to always monitor what you bought, when you bought it, how much you paid and how much money you have left to spend.
3 Ways to Stay Focused on Tracking Expenses
- Set reminders
- Check transactions daily
- Reward yourself for good behavior
At first, it can be an eye-opening experience to examine what you are spending. You may be surprised to learn the places where the majority of your money is going. But once you get started, monitoring spending habits is something that will quickly become second-nature.
2) Skip Starbucks
After you have learned where your money is going, you are ready to start building wealth.
It’s smart to start small. You could accumulate a lot of money by skipping little luxuries, like Starbucks coffee. By eliminating $5 or more from your daily expenses, you could put aside a significant amount of money over time.
For example, $5 a week on coffee adds up to $150 a month. If you invested that money instead, it could grow into hundreds of thousands of dollars over your lifetime.
3) Reduce Living Expenses
Many Long Islanders make the mistake of living far above their means. They often tie up too much of their monthly income in housing or car payments.
Although fancy homes and fast cars are attractive, their price tag can inflate your monthly expenses. Financial professionals recommend individuals maintain a large gap between expenses and income to have the opportunity to invest in the future.
4) Build a Diversified Portfolio
The trick to building wealth is developing a diversified portfolio, which makes consistent gains over time. By holding different types of investments, you will be protected in case a stock, or even an index, falls unexpectedly.
4 Quick Investment Tips
- Don’t put all your eggs in one basket
- Consider index or bond funds
- Don’t stop adding investments
- Know when to get out
5) Increase your Retirement Contributions
One of the principle goals of building wealth is to develop a nest egg that will finance your retirement.
Financial advisors recommend that individuals max out retirement savings options. This includes taking full advantage of an employer’s 401(k) match program and fully funding a Roth IRA.
In order to give your money time to grow, it’s a good idea to start as early as possible. Even small contributions in your 20s or 30s will increase significantly over time.
These five personal financial planning tips and tricks will get you started building wealth the right way. But, if you would like more professional advice, contact a local accountant today.