FOUR WEALTH-BUILDING HABITS TO START TODAY
Use these Strategies to More Effectively Grow Your Wealth Over Time
If you want to achieve financial independence and live the life of your dreams, you’ll need to adopt wealth-building habits that help you accomplish your goals. Like any habits, wealth-building habits must be regularly practiced until they become second nature in order to be effective. To do that, you must exercise patience and commitment.
Habit #1: Invest in Your Future Consistently
Having a “pay yourself first” mentality ensures you’re always growing your savings. With each paycheck you receive, put aside a portion of that money into your savings or investment accounts. Set a goal of saving 10 – 20% of your take-home pay, or more if you’re able to.
Remember, the habit of saving your money every pay is more important than the amount you save. That act will keep you steadily advancing toward your financial goals, rather than absentmindedly spending your money on nonessential items. Consider automating your savings, too, so you can be sure you won’t miss a month.
When you hear advice to “pay yourself first”, it truly means absolutely first – even before paying your bills. That’s why it’s important to have a clear understanding of all the aspects of your own finances. You’ll know exactly how much you can afford to save while still covering your expenses and lifestyle.
Habit #2: Understand Good Debt and Bad Debt
If you consider debt a four-letter word, remember that not all debt is created equal. Some types of debt are actually considered good, especially when you are working to build your wealth.
The trick is knowing the difference between good and bad debt. Credit cards and high-interest loans are generally thought of as bad debt. These can be difficult to repay, and they typically don’t provide a return on investment. Conversely, good debt could include student loans or mortgages. Both of these are investments with the potential to provide a positive return in the future. Perhaps you land a high-paying job because of your education or the rental properties you invested in are bringing in more income than the debt you had to take on in order to purchase them. In both examples, the initial debt has the potential to build your wealth.
Habit #3: Invest Boldly and Wisely
While it is critical to save, you need to make sure you’re putting those savings to work for you. The interest rates on most savings accounts are quite low – averaging about 0.06% according to a recent report by Bankrate – meaning this is an incredibly slow way to build wealth.
Investing is the best option for making significant strides toward your financial goals. The rate of return for investments, even conservative options, is usually much higher than the rate of return on a savings account. Keeping a diversified investment portfolio that aligns with your financial goals and risk tolerance will help jumpstart your wealth building and keep it growing over time.
When you think about investing, consider options outside the stock market, too. For example, rental properties, art, and start-up businesses all present opportunities to invest in something that will grow in value over time.
Habit #4: Create a Financial Roadmap
If you want to reach your desired financial destination, you’ll need a plan to get there. In order to meet your money goals, you have to develop clarity around them first. Your financial roadmap should include both short-term and long-term goals, and it will likely transform over time through different phases of life and as new opportunities present themselves. Reaching any goal becomes infinitely more manageable with a plan, and the first step in charting your roadmap is knowing where you’re starting from. To determine this, you should assess your current financial status, including your net worth, annual income, and appreciating assets.
Next, it’s time to start considering where you want to be financially – and don’t play small. Plot out big goals for yourself, even if they don’t feel particularly attainable in the present. Review your goals often to make sure they still make sense for you, and don’t be surprised if they change over time. Remaining focused on your goals will help you stay the course and, ultimately, increase your chances to build wealth over the long-term.
Are You Currently Utilizing Wealth-Building Strategies?
Each of these four wealth-building habits are timeless, and it’s not too late to start them if you haven’t already. They are effective at helping you make progress now and into the future. If you commit to following them, you will be well on your way to building your wealth in accordance with your personal financial goals.
Of course, it’s important that you continue to educate yourself about financial topics, too. New trends and strategies will appear over time, and the simple act of reading and enhancing your financial literacy will keep your mind focused on the subject of wealth building.
Dedicate an hour or so each week to learning more about financial topics. Whether you are reading books, listening to podcasts, or following along on our TriCapital Wealth Management blog, you’ll enhance your knowledge and be better able to strategize for your own success. And, if you’d like professional assistance in developing a plan to grow your wealth and secure your financial future, the TriCapital team can help you plan confidently. Contact us today to begin the conversation. We look forward to hearing from you!