7 Tips For Building Financial Wealth

 

1.) Identify your passion. Find a job and career that matches your passion. If you are happy with your livelihood, money management and saving can be easier.  

2.) Pay yourself first. Put together a budget that includes saving 10% of your pay.  Live cheap. If just graduating from college, be frugal and continue to live like a college student. If you are spending too much, monitor your expenses and identify ways to cut back.  

3.) Be smart about debt. It is okay to save while you still owe money.  Find credit cards that have no-fees and offer cash back or rewards plans. See bankrate.com, rewardscards.com or creditcards.com to do comparison shopping. Gradually pay down existing balances while building a good credit score.  

4.) Don’t get overextended. Plan and save for big expenses. If you can get a no interest loan, make sure you calculate and budget a monthly payment. Otherwise, you could end up with a huge interest payment at the end.    

5.) Create an emergency fund. Today, the job market is constantly changing. So, be prepared for unexpected transitions. Save an amount equal to 3 to 6 months of expenses. 

6.) Understand the miracle of time and compounding. If you could invest $10,000 at 25 with a 10% return on your investment, you will have $492,592 at 65.  If you wait to start saving until 35 and save $1200 per year for a total of $36,000 with a 10% return, you will only have $217,131.  

7.) Save for retirement. Utilize employer retirement savings plans especially those that match your savings. If you save 3% and your employer matches it, you receive a 100% return! Next, establish a Roth IRA (individual retirement account). Your money will grow tax free and distributions at retirement are tax free.

About the author

Carol Friedhoff, CFP®

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