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How to Build and Grow Wealth for the Long-Term

November 2nd, 2020

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After a long and stressful week at work, you finally have some time to reflect on your life and really wonder, what would you truly need RIGHT NOW to change your life?

Among a plethora of immediate needs comes a long-term goal which always seems to take a back seat – wealth.

You start skimming through various articles on how to build the life of your dreams, devoid of worries related to the mundane lifestyle you desperately wish to escape.

You seek the freedom from having to constantly worry about paying the bills, budgeting through the end of the month, paying that mortgage and hoping you are still left with a good amount of money in your bank account.

The solution is right here – build and grow your wealth!

Here’s 7 tips on how to build and grow wealth for the long-term:

I. MAKE IT PERSONAL

If you are deriving the amount of wealth you need through a random internet search, let me tell you up front that you are doing it wrong. Only you know the kind of life you live today and only you are aware of how you wish for it to improve.

Whether it is your annual expenses, the number of people you support in your family today and will support in the future, the city or town you wish to retire in or if you wish to travel the world post retirement – these are your goals.

Seek motivation from your own desires instead of others and you will work much harder to attain this long-term wealth building goal.

II. SAY GOODBYE TO DEBT

Your dreams of building and growing your wealth will remain a dream unless you act towards your debt NOW!

Whether you are burdened with student loans, car loans, credit card debt or any other personal loans, start paying off your debt at the earliest.

This would mean you can no longer give in to impulse buying or spontaneous vacations without a worry in the world. Paying debt requires discipline and commitment towards your long-term goals.

The sooner you pay your debt, the more money you save on interest payments and this goes straight to building wealth!

III. BUILD AN EMERGENCY FUND

Life is unpredictable and looking at 2020, I am sure none of you will disagree. Job losses, unexpected medical bills, stock market crashes or economic recessions are a part and parcel of life. But these unexpected events must not stop you from planning for your dreams. Before you start building wealth, it is important to ascertain the availability of an emergency fund that can help you cover three to six months’ worth of expenses in case of an unexpected event. Open a savings account with your emergency fund and touch it only in case of a real emergency (No, new car smell is not an emergency to splurge on!)

IV. PLANNING FOR RETIREMENT TODAY

You’ve bid adieu to your debt, built that emergency fund – now is the time to plan for the future and build wealth. Start investing 15% of your gross income into a retirement account such as 401(k) or Roth IRA. This amount is automatically going towards your retirement and the best part is it’s tax free. If your employer has a contribution match, max out your contributions to receive that benefit. For example, if your gross income is $5,000 and you decide to contribute 6% to 401(k), you are saving $300 every month towards your retirement without paying any taxes on this amount. If your employer offers a 50% matching contribution, an additional 3% or $150 will be credited towards retirement. That is $450 saved each month and $5,400 annual savings towards retirement!

V. CURB YOUR SPENDING

If you’re in your 20’s and are just starting out in your career, don’t go crazy buying a new car or splurging on expensive items you don’t need. The key to building wealth is to live below your means and slowly raise your standard of living. Here is a snapshot of annual spending as a percentage of pretax income across various generations. The average amount spent by millennials in 2018 was $52,874!

If you want to grow your wealth, take control of your finances and budget through every dollar spent. Some quick tips to lower your spending right away:

  • Share your apartment if you can with a roommate
  • Cook your own food and save those expensive restaurant bills
  • Buy a good condition used car instead of an expensive gas guzzler
  • Shop when needed, not when you feel low

VI. INVESTING TO GROW YOUR WEALTH

You’ve adopted the frugal lifestyle and started planning for retirement, but the key to growing your wealth faster is investing your savings and allow your money to work for you!

Whether you invest in stocks, real estate, cryptocurrency or even a savings account, don’t jump into any investment without doing your due diligence. It is your hard-earned money that is at stake and instead of listening to random stock tips from unknown “influencers”, do your homework. Learn about asset allocation and diversification. Be realistic about your expectations when you invest and don’t dream about making a million bucks overnight. Building and growing wealth for the long-term requires investing for the long-term as well. This is called value investing, where you invest in a company or an asset expecting the value to gain a significant amount in the future. Do not approach your long-term goals with a short-sighted approach by diving into false claims of day traders who claim to make thousands of dollars in a day.

VII. UPSKILL CONTINUOUSLY

While your bank account continues to grow through savings and investments, it is extremely important for you to also invest in yourself. Improving yourself, learning new skills and keeping yourself updated will never go waste. A healthy and wealthy bank account demands a healthy mind and to keep your mind healthy, stay curious. In difficult times, it is these skills that come to your rescue and prevent you from making mistakes with your acquired wealth. Pursue that hobby you enjoy and turn it into a side business to generate more income. Remember, the idea of building and growing wealth is to not have all your eggs in one single basket and keep looking for ways to make your money work for you!

“ Small changes done over long periods of time can create massive wealth."

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