What Are The Vital Steps To Become Rich?

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.

Daniella Rand

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.

Why Everyone Must Get A Retirement Plan?

By Daniella Rand

Do you have a retirement plan in place?

If not, don’t feel bad. You’re missing out, but you’re not left behind. Millions of Americans are in the same exact position.

Still, it’s high time you did something to address this gap in your financial posture. Here’s why you need to get a retirement plan together this year.

Daniella Rand

1. You Can’t Rely on Your Parents’ Money

Let’s get this one out of the way: The vast majority of everyday Americans can’t count on a life-changing windfall to bail out their profligacy (or reticence to plan). Even those who did have the good fortune to be born into privilege can’t count on actually receiving the inheritance to which they assume they’re entitled. 

Remarriage, out-of-control spending, poor financial planning, criminal activity — all these things and more can jeopardize what appears on paper to be generational wealth.

Your parents always told you to look out for number one, and that you shouldn’t rely on anyone else to act for you. Take that advice to heart and secure your own financial future, without their help.

2. You Can’t Count on Social Security (And It Might Not Be Enough, Anyway)

Despite its reputation as the “third rail” of American politics, the Social Security program’s long-term solvency has been in question for years. If you’re still in the first half of your career today, you may not want to rely on Social Security benefits to fund your retirement income shortfall. 

3. You Probably Don’t Have a Great Pension

Most employers no longer offer pensions to new employees, and those that do tend to be less generous than their predecessors. If you work in the public sector or belong to a trade union, you may be in a slightly better position. But, as a general rule, you should treat your pension as you do your (expected) Social Security entitlement: as a bonus to the retirement income you’re able to guarantee through other means.

4. Inflation Is Inexorable

Recently, we’ve been fortunate to live in a fairly low-inflation environment. Prices continue to rise appreciably, but not at the breakneck pace that those of a certain age can recall from the 1970s and 1980s.

Unfortunately, there’s no guarantee that this condition will endure. The future may well hold another extended period of high inflation, spelling trouble for those without a plan to counteract it.

5. Your Needs Will Change Over Time

Your future income and expenses will change. Having a retirement plan in place ensures you’re able to keep up with those changes and adjust as necessary, especially if a major unforeseen expense suddenly presents itself.

Your Future Is Too Important to Squander

Laying out a retirement plan is one of the most important steps you can take toward financial independence.

This isn’t hyperbole. It’s borne out, again and again, by empirical research. 

Your future prosperity, and that of your closest loved ones, may well depend on whether you’re able to engage in meaningful financial planning before retirement is imminent. That’s an awesome responsibility, and a sobering reminder that the future is a terrible thing to waste.

You Can Never Be Sure About Your Future

By Daniella Rand

No one truly knows what the future holds. Anyone who tells you otherwise probably has something to sell.

We’re not flying blind, however. In our personal and professional lives, we can make educated guesses about the risks and opportunities we might face now and tomorrow. Using what we know about probability and the unique mix of factors that we bring to the table, we can at least begin to determine the likelihood that any particular scenario will come to pass.

Unfortunately, those scenarios aren’t always welcome. However unlikely in any individual case, the six situations described below cumulatively affect millions of American families, always with adverse financial consequences. How are you preparing yourself and your family, should the worst happen?

Daniella Rand

An Unexpected Medical Expense or Disability

Serious medical issues can and do affect otherwise healthy individuals. Sometimes, these issues are more or less discrete — perhaps a short hospital stay followed by a period of rehabilitation and a resumption of more or less normal activity. Even that relatively upbeat scenario may bring overwhelming financial strain.

Extended periods of illness or disability can do even more long-term financial damage, especially when the afflicted individual is unable to work on a semi-permanent basis. Disability insurance can mitigate income loss, but it may not be enough to keep your financial plan on track.

An Extended Layoff That Threatens Your Long-Term Earning Power

A long period of unemployment can threaten your long-term earning power as well, especially if it lasts long enough to erode your skills and render you less than marketable. That could precipitate a vicious cycle of underemployment.

A Tragedy That Affects Your Family’s Finances

The premature death of a breadwinner is too awful for many to contemplate, but the downside risk is too great to ignore. Early in your career, your savings won’t be sufficient to replace this permanent loss of income; life insurance is a critical backstop.

Insolvent Entitlement Programs and/or Private Pensions

Forces beyond your control may conspire to sap your later-in-life income — namely, the looming insolvency crisis that many believe threatens Social Security and Medicare. If you’re relying on Social Security for the bulk of your retirement income, for instance, you may want to think about adjusting your long-term plans.

Health Problems That Force Early Retirement 

Even in the absence of an acute health crisis later in life, health problems could still sidetrack your career. Later in life, when your body is less resilient and your resume less attractive to prospective employers, even temporary health issues are deadly serious — in the worst case, effectively forcing you into retirement. 

Lengthy Long-Term Care Needs

Most people yearn for long life, but at what cost? If you require long-term care due to cognitive decline or infirmity, you’ll need to part with a huge chunk of your nest egg. Your erstwhile heirs may be hardest hit.

What Else Keeps You Up at Night?

As you look to the future, ask yourself: What else is keeping me up at night? And what can I do to prepare myself for these unpleasant eventualities? You might not have a crystal ball, but you do have the power to improve your financial resilience.