A secure financial future is built on wealth. If you’re going to retire and enjoy your golden years, then you need to build up a nest egg over the course of your working life.
Unfortunately, saving a few bucks here and there is not going to be enough: if you’re going to reach your financial goals, then you have to take steps to create real wealth over time. That means making the money you save work for you and generate interest. And it means outpacing inflation and growing your savings to a healthy size that can cushion you during retirement.
That’s easier said than done, but we can help. Below, we’ll lay out a sound strategy for generating wealth.
Budget and save
Spending less than you earn and saving the difference won’t be enough to allow you to retire, unless you’re making millions of dollars as a professional athlete or a CEO (and even then, building more wealth is a smart idea). But, while saving isn’t enough on its own, it is the first step toward any effective plan.
So start by creating a budget. A budget is the key to smart personal finance, and while it might not be much fun to make, it’s an absolute necessity. Carve out space in your budget for necessities like housing and groceries first, then add in the fun stuff that you can afford.
Stash the difference in bank accounts and, later, investments (more on that in a moment). Create an emergency fund that will protect you if things get bad for you unexpectedly.
Investing in the stock market
Once you have some money saved, you’ll need to find a way to beat inflation. If your money isn’t generating any interest for you, then you’re falling behind: your cash will lose value over time due to inflation. Savings accounts are a decent option, but the best way to make your cash work for you is to invest it.
How aggressive you are with your investments is a decision that only you can make. Less active investors can work with a financial advisor or simply put their cash in an index fund that tracks a major market index like the S&P 500. More active investors may want to make more trades, perhaps even becoming day traders who rely on techniques like a Forex scalping strategy to outperform not just inflation, but the stock market as a whole.
But make no mistake: No matter how you want to invest, you do have to invest in order to build real wealth for retirement.
Investing in real estate
Building wealth means more than just owning cash and stocks. You’ll acquire lots of valuable assets over time! One of those things might be your home.
There are a lot of reasons to own your own home instead of renting, but most of them boil down to this: you’re probably going to be spending money every month on the place where you live no matter what. But rent gives you nothing more than a place to lay your head for a month, while a mortgage is putting your cash toward a valuable asset that you actually own. Plus, when your mortgage is finally paid off, you won’t have to pay every month anymore.
Investing in your home is a great way to save on rent, and you may even want to consider additional properties, such as a vacation home or an income property, as investments. Properties can appreciate over time, and (depending on local rules) you may also be able to generate an income from such properties with short-term rentals with vacationers and backpackers.
Saving money isn’t enough to get you to retirement, but you don’t have to work harder to get to the finish line. You just need to make your money work for you. So save up, invest, and be smart!