Unless you’re a member of a royal family or the sole inheritor of your rich uncle’s fortune, you probably don’t expect to simply step into wealth.
But just because you aren’t related to Scrooge McDuck doesn’t mean you cannot escape living paycheck to paycheck. Instead, you can carefully build your wealth over time by making one wise financial choice after another.
Below, we cover the 11 most important choices you can make over the course of your lifetime to maximize your financial success.
Avoid credit card debt
Taking on some types of debt, such as a mortgage or student loan, is often necessary and can even be useful. But taking on other types of debt — especially credit card debt — will do incredible damage to your lifelong quest for wealth.
For starters, credit cards have interest rates that are often ridiculously high. Every purchase you charge to a card and don’t pay off immediately rapidly accrues interest, drastically increasing your debt. Plus, late fees can pile up quickly.
You can end up buried in massive amounts of consumer debt in no time. So, only use a credit card if you’re positive you can pay off the balance every month. Otherwise, your card will be a huge roadblock to financial success.
Start saving early
When you put money away in a 401(k) account or high-yield savings account, you can generate interest not only on your initial sum but on your interest as well. That is the power of compounding interest.
The earlier you start saving money, the more interest you generate and the faster your savings will grow. And it all starts with investing earlier in your career.
Make saving as simple as possible
Make saving as easy as possible by automating everything. If you have a retirement savings account at work, consider automatically devoting a portion of your paycheck to the account each pay period.
Consider also setting up an automatic paycheck deduction will move money directly into a savings account before you can even lay eyes on it. You can also automate bill payments so you don’t have to worry about late fees.
Go to college
On average, individuals who attend college make more money over the course of their lives than those who don’t get a degree.
Women who graduate with a bachelor’s degree earn $630,000 more in lifetime earnings than women without a college degree, according to data from the Social Security Administration.
Men who earn bachelor’s degrees earn $900,000 more over the course of their working lives than men who only have high school degrees.
Buy well-maintained used cars, not new cars
In 2022, Americans who bought new cars — rather than used cars — spent nearly $11,000 in fuel, maintenance, insurance, registration, and other costs.
Multiply that number by 10 and you’ve spent more than $100,000 over 10 years on just one car — and that’s not accounting for the $3,656 you lose to depreciation year over year.
Driving a used car can cut many of those costs. Of course, the cost savings of a used car often depend on how well it was maintained by the previous owner — and how well you maintain it — and what mileage it gets. But a well-maintained used car generally costs much less over the course of its lifetime than a new car does.
Supplement your income with another job
While a full-time, stable job is obviously key to your financial future, the gig economy has opened up a variety of opportunities to make a little extra money on the side.
Whether you drive for Uber during your daily commute or rent out your garage for storage space, maximizing your income will help you save more and build your financial foundation.
Take some investment risks — but not too many
Investing is an essential part of establishing and maintaining wealth, but it’s not enough to simply throw money into the stock market and hope it pays off. Instead, you’ll want to build a diverse investment portfolio that includes safe investments alongside some riskier bets.
After all, while a risky investment can pay off big time and set you ahead of your lifetime financial goals, it can just as easily crash and burn. Instead of putting all your eggs in one high-risk basket, consider adding some more stable investments, such as cash or bonds.
If you’re not sure where to put your money, consider meeting with a good financial adviser to discuss your options.
Cut out non-essential expenses
It might be a cliche, but a penny saved really is a penny earned. Every dollar you put away is another building block in establishing your financial future.
So, whenever possible, make the choice to save instead of spend.
Consider re-evaluating your budget on a frequent basis to figure out how you’re spending and where you can cut back. Replacing eating out in a restaurant with cooking at home might be a sacrifice for now, but it’ll pay off in a major way down the road.
Focus on your own dreams and goals, not another’s expectations
There are a few concrete financial goals everyone should share, such as having an emergency fund and saving enough to retire comfortably. Otherwise, though, it’s important to set your own financial goals instead of gravitating toward someone else’s.
Ask yourself questions such as:
- What does financial success look like for you personally?
- How do you feel about balancing a career that makes you happy with a career that makes you money?
- Where do your goals and expectations differ from those of your parents or neighbors?
It’s much easier to commit to and chase your own dreams instead of the vision of another. So, focus on creating your own dreams for the future.
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Do your research and ask for help as needed
Unless you’re an accountant or financial advisor, you probably aren’t a money guru — and that’s OK. You don’t actually have to shoulder the entire weight of managing a lifetime of wealth.
The options for expanding your financial knowledge and learning to save and spend effectively are endless. They include:
- Talking with accountants and financial advisors
- Using budgeting apps
- Taking free financial courses at the nearest community college
- Attending money presentations at your local library
- Reading books and listening to podcasts on wealth management
Take advantage of your employer’s matching retirement contributions
Does your company offer a 401(k) or other retirement plan? If so, remember our tip about saving as early as you can and set up your account sooner than later.
Next, find out if your employer offers a retirement contribution match. If so, capitalize on that immediately.
When your employer matches a portion of your own contributions dollar for dollar, they’re basically handing you free money. Throwing that away jeopardizes your ability to retire comfortably and puts your financial goals further out of reach.
You don’t need a sudden, unexpected windfall to create a lifetime of wealth. Instead, make a series of choices that, taken together, will help you meet financial goals and create the stable fiscal future you’ve always hoped for.
Look for ways to build up your income — such as through a side hustle — and pay down your debts. Then, invest the extra savings. Over time, you can give Scrooge McDuck a run for his money.