When you have a solid financial foundation, you can begin building wealth. Wealth building means more than just putting a portion of your paychecks into a savings account (though that’s a great start). You have to think creatively about the right long-term saving and investment strategies to build sustainable income.
Financial literacy is at the core of private wealth management. Even the most ambitious wealth-building plans begin with the following fundamentals.
Thoughtful goals
What do you want your money to achieve for you or your loved ones? Your hopes, dreams, and plans should shape your wealth-building approach. Think big as you begin setting your goals—maybe you want to save for retirement, travel the world, give back to a beloved cause, or leave your family with generational wealth.
When you have an idea of the future you want to build, you should get specific about dollar amounts. Try to break your goal down into financial milestones for the coming years. Your goals should be realistic, achievable, and measurable. A financial advisor could help you transform your goals into a tailored budget and plan for building wealth.
Smart saving strategies
Once you’ve set goals, you can begin saving with intention. Choose a savings account carefully. The money you put into savings can accrue interest over time. You could maximize your returns by choosing a high-yield savings account, which is an account with a high interest rate.
However, high fees may offset some of those earnings, especially if you start by saving small amounts at a time. It’s important to strike the right balance between interest rates and fees. As your income increases, increase your contributions. Once you meet a certain threshold, a higher-yield savings account could be more strategic.
Wise investments
While savings accounts play an important role in most financial plans, most accounts only yield modest returns. A robust, thoughtful investment plan is key to increasing your wealth. You have many types of investments to choose from, each with its own degree of risk and earning potential.
Stocks and bonds are the two types of investments you’ll likely encounter as you’re starting out. Stock represents a percentage of a company’s ownership. You invest in stocks by buying or receiving shares or units of ownership.
As the company earns profits, your shares become more valuable. If the company fails, you may lose your investment. A bond is like a loan you make to a government entity or a corporation. Over time, it accrues interest. Stocks are generally considered much riskier investments than bonds.
Typically, the higher the risk, the higher the potential for reward. However, a balanced portfolio should include higher and lower risk options to maximize potential returns and minimize risk.
You don’t need high income to begin building wealth. You just need the right skills. Improving your financial literacy could help you build your toolbox to take the necessary steps today to secure your future tomorrow.
