Unfortunately for many people, their overarching financial goal tends to be based on short-term objectives and concepts, but they should be focusing their strategies on the long-term. It’s difficult to create short-term wealth, but it’s not actually incredibly difficult to build long-term wealth if you’re strategic.
Building long-term wealth may mean you have to sacrifice some things in the present, but it can ultimately be more rewarding throughout the course of your life.
The phrase “building long-term wealth” can be intimidating, but it’s not. It’s a slow, steady, manageable process.
Below are some tips to help you get started, whether you’re a Millennial just beginning your career, an entrepreneur or business owner, or anyone else interested in the building of a stronger financial future.
Work on Having a Larger Gap Between Income and Expenses
Saving more money isn’t going to build wealth alone, but it’s an important building block of having the means to accumulate more wealth.
Your first financial goal should be expanding the gap between your expenses and your income in the right direction.
This usually comes through a combination of spending less, but also doing things to earn more, such as taking on freelance or consulting work.
Invest and Save Regularly
A lot of people will either invest regularly or save regularly, but not both. Most people tend to err more on the side of saving regularly, and while it’s great to save money for emergency expenses, if you keep your money in a savings account or money market, you’re eroding its value. Inflation will rise, and your money won’t keep pace if it’s in a savings account, so ultimately you’ll be left with a lot less purchasing power in your retirement years.
A better option is to make sure you’re both investing and saving money on a regular basis. You might start with something as small as $100 a week toward an investment account and $100 toward your savings. It doesn’t have to be a lot, but make sure you’re doing both.
Consider Riskier Investment Strategies
Once you’ve built enough of an emergency fund to cover your living expenses for at least six months, and you feel comfortable with investing a bit more money, you might want to explore some riskier strategies.
Safer options can include mutual funds and ETFs, and they’re a significant part of a portfolio, but you can also potentially get higher returns with a bit more risk. For example, maybe you’ll research active trading strategies and invest a bit of your money in that way. Whatever it is, don’t be afraid to step out of your comfort zone when it comes to investing, because playing it safe isn’t necessarily the best way to accumulate wealth.
As a final note, if you do want to build wealth, you need to start right now. One of the biggest problems many people face as they near their retirement years is that they didn’t save enough, and that’s because they didn’t start early enough.
The sooner you start, the better equipped you are to build your wealth. It can be tough, particularly if you’re just starting your career or growing your business, but you’re giving yourself not only more time, but you’re also protecting yourself more against the potential downside of riskier investments, because you’ll have more time to recoup any losses you may incur.
Ultimately, procrastination is the number one deterrent of long-term wealth accumulation, so keep this in mind as you create your financial plan.