The financial choices that we make now can have effects, both positive and negative, for decades to come. By consciously making the decisions that will build a strong foundation for wealth, we can look forward to a comfortable retirement and a secure future. This is a great time of year to consider your wealth building strategies and course correct to increase your wealth year by year.
- Perform a fiscal check-up.
Start by taking stock of where you are right now. What assets do you hold? Are debts taking a chunk out of your savings? How soon do you think you’ll need your savings and is it on track to grow fast enough to meet your needs?
These questions can help you decide how you will allocate money throughout the year. For instance, putting more money toward a debt with a high interest rate means paying less in interest over time and eventually having more to put toward your future.
- Automate your investing.
When we plan to put money into investments after all the bills are paid, we are often setting ourselves up for failure. It’s too easy for extra money to get eaten up by inessential expenses. Instead, have money directly taken out of your paycheck or accounts before you start spending the money on something else.
One good way to do this is by direct depositing money into retirement accounts with every check. Choose a percentage that works for you — many experts recommend 10 or even 15% — and direct it toward an investment you are comfortable with. If you or your spouse have access to a 401(k) with matching funds, try to max that out first. When you don’t take advantage of matching funds, you are passing up an immediate 100% return on your investment.
- Stay slow, steady and consistent.
It can be tempting to chase big gains. But they always come with big risk. It’s better to choose specific strategies and stick with them. No one strategy is perfect for everyone. Explore tactics like dollar cost averaging and buy and hold to develop a plan that works best for you.
The most important part is to stay consistent. When we put the same percentage of our pay into an index fund every pay period, we’re likely to have investments that perform as well as the market as a whole. Someone who pulls money out of one investment to fund the latest hot stock is more likely to be buying when investments are over-hyped, and over-priced.
There is no magic formula that will make anyone rich overnight. For most of us, building wealth means making careful decisions and incremental progress over months and years. By making conscious choices that are likely to grow your wealth, you can see your portfolio grow in 2021 and beyond. For further advice on what to do with your money, contact The Money Man at Firefighters Credit Union by calling 608-784-9480!