How do you acquire wealth?
If you’re like most people, you probably don’t have a great deal of money in your bank account or other assets sitting around. The key to building up wealth is learning how to manage it properly so that it grows and compounds over time, allowing you to build up substantial wealth throughout your lifetime and protecting it from those who might seek to take advantage of you. Here are five tips on how to manage your wealth successfully, no matter where you live in the Los Angeles area.
1: Save For Retirement
Since young people often don’t have a lot of money, retirement planning can seem overwhelming. If you start saving as early as possible, however, it is much easier to save up a large sum by retirement time. One way to ease into your future savings plan is by setting up an auto-deposit into your 401(k) or 403(b). Use auto-deposit so that it’s done automatically for each paycheck. Your contribution will build over time, and before you know it you’ll be on track for retirement! The earlier you start saving and investing, the greater chance you’ll have of growing your money over time!
2: Create A Budget
When you’re trying to manage your wealth, it’s important to create a budget and stick to it. Make sure that you know how much money is coming in, and make sure that you know how much money is going out. For many individuals, sticking to a budget will be a challenge; if you find yourself breaking your budget down into smaller chunks with mini-goals, you’ll likely see some of those challenges diminish. Regardless of what type of budgeting works best for you, one thing remains clear: making a plan is always better than winging it.
3: Invest Wisely
Wealth management is a topic that’s constantly getting more complicated. Just look at all of the new tools that have emerged in recent years to help us invest better. As with any investment, you need to consider your options and make sure you understand them fully before making a decision. Here are some ways you can use wealth management tools to help you make better investing decisions.
4: Take Advantage Of Tax Breaks
It’s important to keep an eye on your tax situation at all times, even if you don’t feel wealthy. That’s because rich people don’t usually pay more in taxes—they just pay them in different ways. For example, many of their investments are in tax-deferred retirement accounts; because they aren’t paying taxes on their savings, it looks like they aren’t paying any taxes at all! But that’s not true; Uncle Sam will be there waiting when these savings start to get withdrawn. You can take advantage of that through a so-called backdoor Roth IRA (and then eventually convert it into a Roth IRA). This may also make sense if you expect that your income will be taxed at higher rates later in life when you may have less than optimal income sources and deductions coming in.
5: Stay Out Of Debt
A good wealth management strategy starts with managing your debt. Debt will keep you from building wealth, so pay it off as quickly as possible. And be wary of taking on too much debt—you don’t want to find yourself in financial trouble because you over-leveraged yourself. Start by paying off high-interest debts first (credit cards, payday loans) and work your way down from there. A good rule of thumb is to have no more than 15% of your income going towards debt payments. This allows you room to save while paying down your obligations. If you can reach a point where all of your debt is at 0%, then you can move on to saving or investing.