By Daniella Rand
What are the vital steps to become rich?
It sounds like a reasonable question. But is it on base?
The short answer is, not exactly. A more appropriate question to ask might be: What should I do to begin building wealth today?
The short answer to that question is, quite a bit. But let’s not put the cart before the horse. If you’re serious about creating real wealth for yourself and your family, you’ll need to take care of the basics first.
6 Steps to Build Wealth (And It’s Never Too Early to Start)
No matter how modest your income or how crushing your debt burden, building generational wealth is not out of your reach. Here’s how to get started and stay on track.
1. Set a Realistic Savings Goal and Stick to It
First, set a realistic savings goal, expressed as a percentage of your take-home pay, and stick to it. This will probably necessitate the creation of a household budget or spending plan, if you don’t have one yet.
2. Set Up Tax-Advantaged Investment Accounts, Even If You Can’t Max Out Your Contributions Yet
Don’t yet have an IRA? Set one up today and fund it with an initial deposit. Even if you can’t afford to contribute up to the annual limit imposed by the IRS, anything helps.
3. Familiarize Yourself With the Basic Principles of Investing
You don’t have to sit for your Series 7 exam or anything like that, but you’ll benefit from a basic understanding of fundamental investing concepts. As your confidence grows, you’ll utilize these concepts in your own practice, or keep tabs on your wealth manager as they do so on your behalf.
4. Find Your Tolerance for Risk
Next, assess your tolerance for market risk. If you’re dispositionally conservative, you’ll want to be overweight fixed-income instruments for your age; if you’re a risk-taker, you’ll be more comfortable with a portfolio that’s overweight equities.
5. Connect With a Wealth Management Professional Who Actually Gets You
Conversations about risk tolerance are best had with a wealth management professional, by the way. Find one whose personal style and investing philosophy align with your own.
6. Lay Out Your Long-Term Career Plan (And Look for Opportunities to Boost Your Income Along the Way)
Making the most of the money you have today is only part of the equation. You’ll also need to make the most of the money you’ve yet to earn, and to take every reasonable step to increase your earning potential besides. Your career plan is fundamental to this goal, as are any moves you can make to boost non-salary income.
Begin Your Wealth-Building Journey Today
It bears repeating: Wealth is in the eye of the beholder. “Rich” is an inherently subjective term. And net worth tells only part of the story.
If you’re the sort who’s never going to be satisfied with terms like “comfortable” or “just enough,” your wealth-building journey will look very different from the path trod by your more laid-back compatriots. That’s okay. Your personal conception of wealth is the only one that matters. Let others make their own way; you’ve got enough on your plate as you focus on number one.