Building Wealth
Building Wealth
By Dennis Friedman HumbleDollar
I’VE BEEN READING about how people aren’t saving enough money, and how almost half of all Americans carry a balance on their credit cards. Looking to be more financially prudent? Here are 10 pointers on how to build wealth and gain financial security over your lifetime:
1. Save—for a reason. Saving money is the key to building a substantial portfolio. One secret to being a good saver: Have something worthwhile to save for. It might be homeownership or early financial independence.
Whatever it is, write it down and post it where you can see it every day. That constant reminder will keep you on the right track—and help you get in the habit of saving money.
2. Invest in stocks. This is another crucial component of building wealth. My advice: Buy broad-based U.S. and international stock index funds. You’ll capture the stock market’s results at low cost, and that’s proven to be a winning strategy over the long haul.
3. Attend an affordable college. Education debt is a problem for many young Americans. You need to find a quality college that won’t leave you in too big a financial hole.
According to research from the College Board, it takes an average 12 years to recoup the cost of a bachelor’s degree.
n other words, by then, you typically have earned enough to recover the cost of the college degree, plus the lost income from the time you were out of the workforce while studying.
Use that 12 years as a guideline in choosing a college. Will it take you far longer to recoup your costs? You may want to find a less expensive college.
4. Invest early. Take advantage of compounding by investing as much as possible at a young age. If you do this, you won’t have to save as much to meet your financial goals.
What about the need to build up an emergency fund that’ll cover six months of living expenses? You might fund a Roth IRA—and have it do double duty, both acting as an emergency fund and starting you on long-term investing.
You can withdraw your contributions from a Roth at any time for any reason, with no taxes or penalties owed, provided you don’t touch the account’s investment earnings.
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