There is a stark difference between earning money and being wealthy. Wealth is the accumulation of appreciable assets such as property, investment accounts and retirement accounts. Creating wealth requires a strategic plan to save, invest and grow your assets over time.
Here are some ideas to get you on track to grow your wealth.
1. Pay Yourself First
You are your most important asset. You are the person that earns your money. And you are responsible for taking care of yourself first. Make it easy – have money deducted from your earnings automatically and moved into your investment account.
Your investment accounts are different than your savings accounts. Your savings is in cash, CDs or money market accounts and can be easily accessed in case of emergencies or large purchases. Additionally, savings accounts should represent what you’ll need to live off of for six to nine months in case your source of income disappears because you lose your job, become disabled or, perhaps, have to care for a loved one. Your investment accounts – your retirement or brokerage accounts – are for the longer term.
2. Live Below Your Means
You shouldn’t spend all of your income. Period. Just because you have money in your checking account after you’ve paid your bills, you shouldn't just spend it all. These funds should be allocated appropriately to your savings and investments accounts.
This doesn’t mean you don’t treat yourself periodically. And it doesn’t mean you can’t celebrate or share wonderful experiences with family and friends. What this means is that you take the time to think about what is special to you and plan for it. For example, if it’s a trip to Disney World, be smart about it. Save and look for discounts. (For related reading, see: Start Your Financial Plan by Talking About Money.)
3. Think Long Term
Wealth, although at times obtained through a windfall, is more frequently associated with consistent investing over time. These investments frequently include savings, retirement accounts, investments accounts, a home and perhaps an investment property.
For women, this is especially important. They tend to live about five years longer than men. According to the Society of Actuaries, A 65-year-old woman has a 53% chance of living to age 85 and a 32% chance of living to age 90.
4. Make Consistent Investments
Similar to contributions to your company’s retirement plan, investing consistently beyond a savings account allows your funds to grow in the stock market. Consistent investments also allow you to purchase securities when they cost less – when the market is down.
Your investment accounts, such as your retirement or brokerage accounts, are for the longer term. As little as $50 a month consistently invested in your account can grow substantially if invested in a balanced portfolio.
5. Ask for Help
Establish a relationship with a financial advisor. A financial advisor will work with you to create a strategy that is supportive of you and your lifetime goals. This person can help turn your income into wealth by helping you identify goals that support what’s important to you. Just think: your advisor may have ideas you never thought of or help guide you through a difficult time. There is no reason to do this alone.
For women, this is especially true. We may not be as comfortable with the terminology of finance and how all the various instruments work. Therefore, find an advisor who is patient and is grounded in educating her clients. (For related reading, see: Youth and Roth IRA Equals a Solid Retirement Plan.)