It’s no secret that you need to start saving for your future if you want to be wealthy down the road.
The problem is most people keep putting it off. And while it’s never too late to start, the longer you procrastinate, the more you’ll need to save overall.
Building wealth takes time. The sooner you start saving and investing, the more time your money has to compound and work for you.
Compound interest is one of the most powerful wealth-building tools available. The sooner you start saving and investing, the more time your money has to compound and grow.
For example, let’s say you start saving $500 per month in a 401(k) at age 25.
Using this compounding calculator, you can see that if you continue making contributions for 40 years and earn an annual return of just 5%, you’d save $240,000 in total, but your account will be worth more than $724,798.65 when you’re 65.
But if you wait until age 35 to start saving that same amount each month, your 401(k) would only be worth about $398,633.09 at age 65.
You’d have to save more than $900 per month for 30 years or more than $326,000 in total to have a nest egg near the value of your 25-year old saving self.
That means putting away almost $100K more because you waited 10 years. The news is worse if you don’t start saving until you hit your 40s.
A 45-year old would have to double their monthly savings contribution, for a total contribution of $432,000, to have more than $714,000 saved by 65 years of age.
If you’re ready to stop delaying and instead start saving for tomorrow, keep reading!
9 Tips for Growing Your Wealth
It’s wise to begin saving today to achieve financial goals and create a safe and secure future. Because no matter how lucky you think you are, your chances of striking it rich by winning the lottery are about 1 in 300 million, terrible odds.
But you can increase your chances of attaining financial independence and generational wealth by following these nine tips:
1. Understand your money mindset.
Do you see money as a tool to get what you want in life, or do you believe that money is the root of all evil? Your mindset about money will determine how much wealth you build over time.
If you want to build wealth, you need to think about money positively.
When you see money as a tool to help you achieve your goals, you’ll be more likely to save and invest it wisely.
On the other hand, if you believe that money is the root of all evil, you’ll be more likely to spend it all and have nothing left to show for it later.
Develop a good mindset and relationship with money, and you’ll be well on your way to building wealth.
2. Create a saving and spending plan and stick to it.
You don’t need to be a financial expert to create a budget. Start by tracking your spending for a month to see where your money is going.
Then, make adjustments to ensure you’re living within your means, eliminating any debt, saving for specific financial goals, and investing money for your future.
It’s also wise to build up an emergency fund to cover unexpected expenses like a job loss, medical bills, or car repairs.
Once you have a plan in place, stick to it! Discipline is critical when it comes to saving and spending.
3. Save before you spend.
Automate your finances so that a fixed percentage of your income is transferred to savings and investments before you get a chance to spend it.
This is called the “pay yourself first” principle, and it’s one of the most important rules for building wealth.
If you wait until after you’ve paid your bills, groceries, and other expenses to save money, there won’t be anything left.
But if you make saving and investing a priority by automating it, you’ll be able to build wealth even if you have a tight budget.
With the pay yourself first principle, you’ll transfer a fixed percentage of your income into savings and investments each payday before you spend any of it.
For example, let’s say you make $70,000 per year and you want to save 20%.
Every time you get paid, automatically transfer 20% of your paycheck into savings and investment accounts. This can include your automatic 401(k), HSA, or other employer-sponsored savings plan payroll deductions, an IRA, brokerage account, or other investments.
If 20% seems impossible right now, start with a smaller amount and increase the percentage when you receive a raise or eliminate a student loan. It will add up over time if you’re consistent. And the sooner you start, the better.
4. Live below your means.
You’ll need to make small sacrifices today to build wealth for tomorrow, which means spending less than you earn and investing the difference.
It’s not easy, but it’s worth it.
One way to do this is by delaying your wants today until you meet your needs tomorrow. For example, if you want a new car, put that money into savings instead and buy a used car.
Or, if you’re dreaming of a vacation getaway, wait until you’ve saved enough money and then take the trip.
You can also build wealth by creating multiple streams of income. This could include earning money from a side hustle, renting out a room in your house, or investing in real estate.
The more money you can bring in each month, the more you can save and invest for your future.
5. Invest in yourself.
One of the best investments you can make is in your own education and career development. By investing in yourself, you’re setting yourself up for future success.
There are many ways to invest in yourself, including taking classes, reading books, attending workshops, hiring a coach, and networking with others in your field.
The more you learn, the more money you’ll make. And the more money you make, the more you can save and invest.
So invest in yourself and continue learning new things. You’ll be glad you did.
6. Invest consistently.
Start saving now. Even if you can only save $10 or 20 per week, begin today! The key is to make saving a habit, so you don’t have to scramble later when you realize you need more savings.
Automate your investing and increase the amount you save and invest monthly, as often as possible, to ensure you achieve your financial goals.
7. Invest in a diversified portfolio.
You’ve likely heard the phrase “don’t put all your eggs in one basket”. This means you’ll want to diversify your investments so that you’re not as susceptible to market fluctuations.
By investing in various assets, you’ll be able to weather the ups and downs of the market while still growing your wealth over time.
Diversification is an important rule when it comes to investing.
8. Think long-term.
Don’t focus on short-term gains. Instead, think about how you can grow your money over the long haul. This means investing for the future, not trying to get rich quickly.
Besides consistency and diversification, patience to stay the course when investing is essential.
It may take a while before you see results, but you won’t see many positive ones if you don’t remember that investing is a long term game. An investment strategy that remains stable and avoids erratic moves due to the “latest” economic or world news will reward you.
9. Stay disciplined.
Resist the temptation to spend everything you earn (or more!) and remember that wealth takes time and patience to build.
Investing is not a short-term play. You need to remain disciplined to achieve your big financial goals.
This means setting aside money each month for savings and investments, even if it’s only a tiny amount at first. And it means resisting the urge to spend money on things you don’t need.
If you can stay disciplined, you’ll be on your way to building wealth for the future.
The Future Begins Today
Saving for your future doesn’t have to be complicated. Still, you must begin.
These tips can help you start reaching your money goals, but keep in mind becoming wealthy is a journey. So stay focused and continue working towards your financial independence dreams!
Following these nine pieces of advice, you’ll be well on your way to attaining financial security for tomorrow. And with continuous learning to grow your money knowledge and investing prowess, you can further boost your net worth.