As you reach adulthood, it is time to start focusing on building your wealth. As you start making more money, you want to be putting more money away into savings and investments. Building your wealth requires a commitment to savings and investing.
#1 Build Up a High-Interest Savings Account
First, you are going to want to work to slowly build-up money in a high-interest savings account. This should be money that you only access in a financial emergency, such as your vehicle breaks down and you need to fix it, you have to take time off work to fly home to take care of a loved one, or you lose your job.
A high-interest savings account will ensure that you are earning some interest on your money while still having easy access to the money. This is your emergency fund, and should ideally grow a little larger each month. It may take a decade, but eventually, you want to have enough cash in there to cover your living expenses for a year.
#2 Build Up Your Checking Accounts
You don't want to live going every paycheck to paycheck worrying about overdrawing your account. Set a base amount that you always want to keep in your checking account, and make that your zero. For example, always try to keep $1,000 extra dollars in your checking account. If you get down to $1,000 before payday, treat that like you are operating in the red and pay yourself back. This will give you a cushion outside of your emergency fund for unexpected expenses.
#3 Invest in Stocks That Provide Dividends
Make money right now by investing in stock with companies that regularly pay their investors dividends. This is a way to make money that you can reinvest into the stock market. Having a portfolio of stock outside of a retirement fund also allows you a way to access cash by selling your stock if you need it. All of your investments in the stock market should not be through your retirement accounts.
#4 Max Out Your Retirement Account
Next, you should be maxing out your retirement account each year. This may be tough to do when your salary is lower, but if you increase your retirement savings each time you get a raise, you should be able to build up a healthy savings account.
If you meet the income requirements, you should also contribute to a Roth-IRA account each year; this is money that you can access tax-free when you retire.
Of course, in order to build your wealth, you also need to get rid of your debt. Make sure that you make the minimum monthly payment on all debt that you have and be sure to focus on paying off one source of debt at a time until you are debt-free. For more information, contact your local retirement planning advisor.
When my card was declined at the grocery store a few months ago, I realized my financial situation had hit rock bottom. Instead of ignoring the problem, I decided to meet with a financial counselor to see what I could do to make things better. I talked with him about how to handle unplanned expenses and how to budget for my day-to-day life. It was incredible to learn more about money, and now I can proudly say I am living within my means. I decided to make this blog for anyone that struggles with financial planning so that you can turn things around.