11 Tips For Building Wealth That Lasts

Wondering how to get rich? Join the club: investors of all ages and backgrounds are always on the lookout for new investment strategies and ways to build wealth.

However, at the same time, it’s important to remember that chances are you won’t get rich chasing overnight success. Rather, as savvy investors know, instead of asking how to get rich quick, a better approach is looking for ways to get build wealth safely and effectively over time. After all, it’s one thing to get rich – quite another to make it last for years (and generations) to come.

Bearing this in mind, we won’t talk about get-rich-quick schemes or high-risk investments here. Instead, let’s take a closer look at how to establish a smart and sound financial plan that can help you build long-term wealth for retirement and beyond. Read on to discover 11 ways to build wealth safely and effectively.

1. Set Financial Goals 

The first step to building wealth is to set tangible and measurable money goals. Having specific objectives such as saving up for a new home, investing for retirement, or building a financial safety net can help you create a manageable plan for reaching your money goals. What’s more, once you’ve visualized a specific goal you’re saving for, setting a financial target and working backward to set monthly savings objectives, can help keep you motivated as you work toward your goal.

Working toward these smaller milestones can help get you accustomed to practicing good financial habits, and help you stay energized and motivated as you pursue your savings journey.

2. Create a Budget

Next, it’s important to put a budget together so that you have a realistic picture of your finances to make informed decisions about your future.

You can begin by using tools like the Rocket Money^SM app to determine how much you earn and spend on both regular and routine costs (medical checkups, car maintenance, etc.). Rocket Money will even track these automatically, simply by linking your banking and/or credit card account(s). Once you’ve determined what it takes to cover your expenses, set a savings goal that’s comfortable – perhaps starting at 5% of your after-tax income, eventually rising to 15% – 20% over time – and plot how to reach it. 

Many experts also suggest using the 50-30-20 rule – a popular technique that can help you better meet your financial goals by categorizing your monthly income – to help balance spending in different areas. Using this method, you’ll effectively divide your monthly after-tax earnings into three spending categories, allocating 50% to your needs, 30% to your wants, and 20% toward your savings or paying down debt.

3. Lower Your Expenses

Once you have a budget in place and understand where your money is going on a regular basis, you should then look for ways to lower your expenses. Doing so can help you reallocate money toward tasks like paying down debt, and free up funds to apply them to other goals. Some sample ways you might cut down on monthly expenses include, but are not limited to:

• Paying less for car insurance
• Negotiating a cable or phone bill
• Canceling unused subscriptions
• Trying a no-spend or savings challenge
• Canceling unused subscriptions

Some investors even maximize their savings by deciding to embrace a minimalist lifestyle. Many have become advocates of the Financial Independence, Retire Early (FIRE) movement, which promotes slashing spending as much as possible and maximizing investments in hope of early retirement. Of course, this strategy isn’t for everyone, and even small amounts of savings or investments can improve your financial future over time.

4. Increase Your Income

You can always speed up the path toward building wealth by increasing your earnings as well. For example, you might look for ways to generate passive income, pick up a side hustle, sell unwanted stuff, rent out your home as an AirBNB, or start a freelance business. Just a few sample activities you might engage in here might involve:

• Mowing lawns or landscaping
• Walking dogs in the neighborhood
• Providing graphic or website design services
• Selling branded t-shirts, hats and clothing online
• Starting a photography or video editing business

5. Create An Emergency Fund 

Building up an emergency fund can also help keep your wealth where it is in case of an emergency. In normal times, 3 – 6 months’ worth of monthly living expenses is a good goal to shoot for, or 6 – 12 months’ during times of economic volatility or market upheaval but it helps to start small. For example, you may wish to auto-deduct 5% of your after-tax income from your paycheck and automatically have it transfer over to a separate bank account, eventually aiming to grow this amount to 15% – 20% on a regular basis. Funds set aside can be placed in a high-yield savings account or other savings vehicle like a certificate of deposit (CD) as a way to passively increase earnings from interest.

6. Pay Off Your High-Interest Debt

Unfortunately, not all debt is created equal. Noting this, it’s often in one’s best interests to pay off high-interest debt like credit cards first, and as quickly as possible. Should you still need ways to access funds while paying down high-interest debt, keep in mind that you have options. For instance, taking out a personal loan or engaging in a cash-out refinance can help you pay down high-interest debt by borrowing money at a lower interest rate than those offered by credit cards and allowing for more structured payments.

7. Start Saving And Investing Today

With your financial house in order, it’s important to find ways to make long-term investments as well. After all, thanks to rising inflation, money that’s not growing in an account tends to decline in value over time. Keeping this in mind, you’ll want to look at options for growing your wealth by investing, like putting money into stocks, bonds, or other assets. Luckily, there are many ways to build your nest egg, and choose the investments that you prefer based on your personal situation and risk tolerance. You can also consult a financial advisor if the process of doing it yourself seems overwhelming.

8. Look For Tax-Deferred Investments

Tax-deferred investments like employer-sponsored retirement accounts or a Roth IRA can also give your money a boost. That’s because they allow you to defer taxes on any gains  until decades later when they’ve had time to grow and benefit from compound inflation. In effect, they make it possible to invest larger amounts of cash today and save more money for retirement while also saving on taxes today, depending on the type of account.

9. Diversify Your Portfolio

Note that a good investment portfolio should include a mix investments that create a balance between stocks, bonds, and other assets as well. Diversifying your portfolio essentially helps you spread your risk and minimize your odds of taking a financial hit while maximizing your chances of getting ahead when the market rebounds. Many investment portfolios incorporate the use of mutual funds or exchange-traded funds (ETFs), which offer a balance of asset types, to help you in your efforts to diversify.

10. Consider Alternative Ways To Make Money 

Of course, stocks, bonds CDs, and savings accounts aren’t the only ways to build wealth. If you have money to spare, you may also wish to consider alternative investments such as real estate, real estate investment trusts (REITs), and other assets. At the same time, it’s important to keep in mind that these types of alternate investments may also require more effort to upkeep and come with greater levels of risk attached.

11. Ask For Help

Naturally, some investors prefer to manage their financial portfolio themselves. But it’s important to note that even the most veteran and experienced of investors can’t know everything about every investment type or market. As a result, you may find it valuable to work with a qualified financial advisor. A professional financial advisor can aid you in your efforts to create a long-term plan aimed at getting rich the right way. Just make sure they carry the title of “fiduciary” to ensure they keep your best interests at heart.

Bottom Line: Avoid The ‘How To Get Rich Quick’ Mindset

Tempting as it may be to cut corners and fast-track your way to success, remember: it’s often a risky and dubious proposition. Instead, you’re better off  finding ways to smartly manage your money and safeguard against economic uncertainty and unexpected events over time. These habits will serve you for years to come.

Want to get a better handle on your finances and keep track of your savings and investments all in the same place? Download the Rocket Money app today to set up a budget, track your bills, and monitor your net worth.