There is no singular recipe for building a wealthy retirement faster than your peers. If you talk to 1,000 millionaires, you’ll get 1,000 different suggestions.
However, when you drill down and look for the commonalities, there are usually a few things that stick out. And if you’re looking to increase the speed at which you build retirement wealth, you may want to listen up.
The Power of Building Real Wealth
When you compare the United States to other countries around the world, we are an incredibly wealthy country. We earn more, per capita, than most other nations. However, wealth seems to be very unevenly distributed among people. While the one percenters are doing great, the majority of the population is either struggling or slowly building toward retirement.
Is it possible to build wealth faster as you look toward retirement?
According to the latest data available, the average savings for those under the age of 35 is $11,200, while the median is $3,324. For those in the 35-44 age bracket, average savings are $27,900 (with median savings of just $4,710). And while savings do start to increase for those in the 45-54 age bracket ($48,200 and $5,620, respectively) and the 55-64 group ($57,800 and $64,000), these numbers are a far cry from what most people would consider “wealth.”
While there’s no tangible number attached to the term “wealth,” most people would consider it to be an amount of money that allows you to feel comfortable and secure. For some people, it’s enough money to where you could retire today and not feel stressed. Over the years, having a seven-figure net worth has sort of been considered the minimum entry point into the world of the wealthy.
However, most financial planners would agree that one million dollars isn’t nearly enough to retire on — especially if you want to be comfortable.
11 Wealth-Building Tactics For a Strong Foundation
Building wealth is something that many people aspire to, but they often find it difficult to achieve. It can seem like a daunting task to accumulate significant amounts of money, especially when faced with the challenges of debt, limited income, and economic uncertainty.
However, there are many strategies and techniques that can help you build wealth faster and more efficiently, whether you’re just starting out or looking to boost your existing financial portfolio.
Here are a few tactics to consider implementing, so that you can take control of your financial future and achieve your goals.
1. Erase High-Interest Debt
Among the most important steps you can take towards building wealth and paving the way for retirement is to eliminate any high-interest debt that you may have. Credit card debt, personal loans, and other types of consumer debt can be major drains on your finances, as you may end up paying far more in interest charges than you initially borrowed. If you’re carrying a balance on a credit card or other debt with an interest rate above 10%, it’s usually a good idea to prioritize paying it off as quickly as possible.
There are several strategies you can use to tackle high-interest debt.
- One option is to prioritize paying off the highest interest rate debt first, while continuing to consistently make minimum payments on other balances. This is known as the “avalanche” method and can help you save money on interest charges over time.
- Another approach is the “snowball” method, which involves paying off the smallest balances first while making minimum payments on larger debts. This can help you build momentum and stay motivated as you pay off your debts one by one.
2. Budget Wisely
In addition to eliminating high-interest debt, another key step in building wealth is to create a budget that allows you to live within your means and save money. A budget can help you track your expenses, prioritize your spending, and avoid overspending in areas that aren’t aligned with your long-term financial goals.
To create a budget, start by calculating your monthly income and expenses. Then, identify areas where you can cut back on unnecessary expenses, such as dining out or subscriptions you don’t use. Consider setting specific savings goals, such as saving for a down payment on a house or building an emergency fund, and make sure to allocate a portion of your income towards these goals every month. By sticking to a budget and saving consistently, you can start to build wealth.
3. Start a Side Hustle
If you’re looking for ways to boost your income and accelerate your wealth-building journey, starting a side hustle can be a great option. A side hustle is any type of work you do outside of your primary job, such as freelancing, consulting, or selling products online. (It’s also something that you can take with you into retirement.)
There are many benefits to starting a side hustle, including the ability to earn extra income, develop new skills, and build your network. Additionally, many side hustles can be done on a flexible schedule, allowing you to work around your existing commitments. To get started, consider your skills and interests, and identify areas where you could offer services or products that people are willing to pay for. Some popular side hustles include pet-sitting, tutoring, web design, and e-commerce.
4. Trade Futures
If you’re interested in investing, futures trading can be an exciting and potentially lucrative option. Futures are contracts that allow you to buy or sell an underlying asset, such as commodities, currencies, or stocks, at a predetermined price and date in the future. Futures trading can be risky, as the price of the underlying asset can fluctuate wildly, but it can also offer high rewards for those who are successful.
To get started with futures trading, you’ll need to open a trading account with a brokerage firm that offers futures trading. You’ll also need to do your research and learn about the markets you’re interested in, as well as the factors that can influence price movements. Many traders use technical analysis, which involves analyzing price charts and using mathematical indicators to identify trends and entry and exit points.
It’s important to note that futures trading can be highly volatile, and there is always the risk of losing money. As such, it’s important to approach futures trading with caution and to only invest money that you can afford to lose. Additionally, it’s important to have a well-thought-out trading plan in place, including risk management strategies and clear entry and exit rules.
5. Invest in Real Estate
Investing in real estate is a powerful way to build wealth over time. Real estate investing can take many forms, from buying and renting out properties to flipping houses for a profit. Real estate can offer both passive incomes through rental income and capital appreciation over the long term.
To get started with real estate investing, you’ll need to do your research and identify opportunities that align with your goals and risk tolerance. Some popular real estate investment options include purchasing rental properties, getting involved with real estate crowdfunding, and investing in real estate investment trusts (REITs).
When investing in real estate, it’s important to understand the risks and rewards of each option as well as the local market conditions in the area where you’re investing. You’ll also need to have a solid understanding of the financials involved, including rental income, expenses, and financing options.
The great thing about real estate investments is that you can hold them in your portfolio throughout retirement and continue to reap the financial rewards.
6. Diversify With Cryptocurrency
Cryptocurrency has emerged as a new asset class in recent years, offering investors the potential for high returns but also significant risks. Cryptocurrencies are digital assets that use cryptography to secure and verify transactions on an immutable ledger. Bitcoin is the most well-known cryptocurrency, but there are thousands of others available, each with its own unique features and risks.
Investing in cryptocurrency can be a speculative and volatile option, as the price of cryptocurrencies can fluctuate wildly based on a range of factors. However, for those who are willing to take the risk, cryptocurrency can offer high potential returns and the opportunity to diversify their investment portfolio.
To invest in cryptocurrency, you’ll need to open an account with a cryptocurrency exchange, which will allow you to buy and sell cryptocurrencies. You’ll also need to do your research and understand the risks involved as well as the technical aspects of cryptocurrencies, such as wallets and blockchain technology.
7. Automate your Finances
One of the most effective ways to build wealth over time is to automate your finances, which can help you save money consistently and avoid overspending. Automating your finances involves setting up automatic payments and transfers for bills, savings, and investments. That way, thinking about them on a daily basis isn’t necessary.
To automate your finances, start by setting up automatic payments for bills, such as rent or mortgage payments, utility bills, and credit card bills. Then, set up automatic transfers to your savings and investment accounts, so that a portion of your income is automatically saved and invested each month.
If you automate your finances, you have the opportunity to avoid the temptation to overspend or skip savings contributions. Additionally, it will save you time and mental energy to automate your finances, as you don’t have to worry about manually making payments or transfers each month.
8. Maximize Your Retirement Contributions
Investing in tax-advantaged retirement accounts is an important part of building long-term wealth. By maximizing your retirement contributions, you can take advantage of tax benefits and compound interest to grow your savings over time.
If you have a 401(k) or similar employer-sponsored retirement plan, consider contributing the maximum amount allowed each year. For 2023, the maximum contribution limit for a 401(k) is $22,500, with an additional catch-up contribution of $7,500 for those aged 50 or older.
If you don’t have a retirement plan sponsored by an employer, consider creating an individual retirement account (IRA). For 2023, the contribution limit for a traditional or Roth IRA is $6,500, with an additional catch-up contribution of $1,000 for those aged 50 or older.
By maximizing your retirement contributions, you can build a significant nest egg for your future while reducing your tax liability.
9. Diversify Your Investments
Diversification is a key principle of investing, as it helps to spread your risk across a variety of different assets and investments. By diversifying your investments, you can reduce your exposure to any one particular asset class or investment, which can help to protect your portfolio in the event of a downturn in the market.
To diversify your investments, consider investing in a mix of stocks, bonds, real estate, and alternative assets such as commodities or cryptocurrencies. Within each asset class, you can also diversify further by investing in a range of different companies or properties, rather than putting all your money into one single investment.
While diversification can’t eliminate all investment risk, it can help to mitigate risk and increase the likelihood of long-term growth.
10. Focus on Increasing Your Income
While reducing expenses and saving money is important, another way to build wealth faster is to focus on increasing your income. By earning more money, you can save and invest more, which can help to accelerate your wealth-building goals.
To increase your income, consider asking for a raise at work, taking on additional responsibilities, or looking for higher-paying job opportunities. You could also start a side business or freelance gig, which can generate additional income and potentially turn into a full-time career.
11. Consider Working With a Financial Adviser
If you’re serious about building wealth, consider working with a financial adviser who can help you develop a personalized financial plan, identify investment opportunities, and navigate complex financial decisions.
A financial adviser can offer valuable insights and guidance on topics such as retirement planning, tax optimization, investment selection, and risk management. They can also provide accountability and help you stay on track with your financial goals.
When choosing a financial adviser, look for someone with relevant experience, certifications, and a track record of success. Meet with several advisers to find someone who you feel comfortable working with and who understands your unique financial situation and goals.
While working with a financial adviser comes with a cost, the potential benefits of having a professional on your side can outweigh the expense over the long term. By taking advantage of their expertise and guidance, you can build wealth more efficiently and confidently.
Ready, Set, Build Wealth
As you can see, there are plenty of different approaches to building a wealthy retirement as you begin to plan. By attacking it from all angles — including earning, saving, and investing — you can increase your chances of being able to achieve your version of financial freedom. Now…buckle down and get to work!