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The Six Steps to Wealth

Do you earn a good income, but find it difficult to accumulate wealth?

Are you finding there is more month than money every month and wish you could just win the lottery?

We understand how difficult it can be to create wealth when you struggle to keep you head above water. There is a big difference between earning money and being wealthy. The average American believes that the richest fifth own 59% of the wealth and that the bottom 40% own 9%. But the reality is very different. The top 20% of US households own more than 84% of the wealth, and the bottom 40% combine for a paltry 0.3%. At the very top it is even more extreme. So we begin to believe that the opportunity to build a financial secure future is far from a reality. The truth is you can do this. You simply need to follow a few steps very consistently over time and you can build the type if financial security you need for a better life for yourself and your family.

You see wealth is the accumulation of appreciable assets over time. These assets are the things that put your money to work and never sleep. They include rental property, dividend growth stocks, investment accounts and retirement accounts. Creating wealth requires a plan to save, invest and grow your assets over time so that you can take advantage of compound interest.

Here are six steps to get you on track to grow your wealth.

Learn about money and investing

The truth is financial literacy is the most important skill you can develop to build a plan for your financial security. The best investment you can make is in yourself and your financial education. It’s the obvious starting point to building wealth. Here’s why:

  • Provides dividends for life that nobody can ever take from you

  • Increases your earning potential

  • Increases your potential return on investments

  • Improves the quality of your life and finances

  • Provides peace of mind around money.

1. Pay Yourself First

The single most important step you can take toward financial security is to pay yourself first every month. You are important. You are worth it so pay yourself. Make it easy—have money deducted from your earnings automatically and moved into your 4019 (k), IRA or investment account.

These days you can start with as little as $5 a month, so you have no excuse for not doing this.

Your investment accounts are different than your savings accounts. Your savings is in money in your checking account (cash), a savings account or a certificate of deposit can be easily accessed in case of emergencies or large purchases. Your savings accounts should represent what you’ll need to live off of for several months in case your source of income disappears because you lose your job, become disabled or, perhaps, have to care for a loved one. Your investment accounts—your retirement accounts, mutual funds, stocks and bonds—are for the longer term. You need some of both so get started.

2. Live Below Your Means

You shouldn’t spend all of your income. If you find you are spending all of your income, take an assessment of where you spending money and learn to cut back on those things you do need or to save on things like your weekly grocery bill, cell phone bills and the like.

This step is really part of step 1 – Pay Yourself First. You have to make yourself a priority when it comes to your money. These funds should be allocated appropriately to your savings and investments accounts.

This doesn’t mean you can’t celebrate or share wonderful experiences with family and friends. What this means is that you think about what is special to you and plan for it. For example, instead of dinner out, invite friends over for a potluck dinner and movies at home.

4. Think Long Term

Wealth, associated with consistent investing over time. The average millionaire is 57 and has been saving/investing for years. These investments frequently include savings, retirement accounts, investments accounts, a home and perhaps an investment property.

5. Make Your Investments Automatic

Similar to contributions to your company’s retirement plan, investing consistently beyond a savings account allows your funds to grow in the stock market. Automatic investments also allow you to purchase securities when they cost less—when the market is down.

Your investment accounts, are for the longer term. As little as $50 a month consistently invested in your account can grow substantially if invested in a balanced portfolio.

6. Ask for Help

Most of these things you can do on your own, but for some things you might want to establish a relationship with a financial advisor. Look for a fee-only financial planner will work with you to create a plan that supports lifetime goals of financial security. A good financial advisor can help turn your income into wealth by helping you identify ways to invest that support what’s important to you. Your advisor may have ideas you never thought of or help guide you through a difficult time. There is no reason to do this alone.

Just find an advisor who is patient and is grounded in educating clients in how to invest in ways that are really simple. You might consider a fee-only Certified Financial Planner (CFP). The National Association of Personal Financial Advisors maintains a directory of fee-only advisors.

A fee-only financial advisor only provides advice and sells no products nor receive no commissions from product providers. Knowing this, you can be confident that their recommendations are for your benefit. Because fee-only financial advisors are independent, they offer clients access to a greater diversity of products and strategies and are often able to significantly reduce the underlying fees and expenses of clients' investments and insurance.

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