Let’s face it, talking about money doesn’t usually make the top ten list of fun dinner table conversations.
Most people either dodge the topic entirely or throw around buzzwords like “diversify your portfolio” or “optimize your tax strategy” like confetti without actually knowing what they mean. One thing is true, though, and that is the fact that getting smart about your money doesn’t require a degree in finance.
Whether you are in your 20s and trying to figure out how to stop living paycheck to paycheck, in your 40s wondering if your retirement plan is more fantasy than reality, or in your 60s wondering if it’s too late to get it together, this information is for you.
So, read on for some wealth-building advice that has been turned into straight talk that works, no matter where you’re starting from.
Know Where You Are So You Know Where to Go: Before you can build wealth, you need to figure out what the heck is going on with your money right now. Like, right now. That means:
- What’s coming in (income)?
- What’s going out (expenses)?
- What do you owe (debts)?
- What do you own (assets)?
Once you answer these questions, you have your financial GPS in place. You wouldn’t start a road trip without knowing your starting location, right? The same goes for wealth-building. Apps like Mint, YNAB, or good old-fashioned spreadsheets can help.
Keep in mind that if your credit card statement gives you anxiety, that’s a sign to get curious, not judgmental. Awareness is your first place to start in your quest for financial security.
Pay Yourself First: Wealthy people don’t save what is left over. They save first, then spend the rest. That’s a mindset shift with a huge impact.
Set up automatic transfers to a high-yield savings account, retirement fund, or investment account as soon as you get paid. This removes the temptation to spend what you think you can afford to save later, because you won’t save it in the end.
Here is a rule of thumb to follow: You should strive to save at least 20 percent of your income if possible. If that feels like a reach, then start with five percent and increase it every few months if possible.
Destroy Debt Like a Boss: Debt is like that ex who keeps showing up when you’re finally doing well. It drags you down and eats at your potential.
Start with high-interest debt, such as credit cards and payday loans, and knock it out using either the avalanche method (tackle the highest interest first) or the snowball method (start with the smallest balance to build momentum). Whatever gets you moving is what you should go with.
Keep in mind that if you are only making minimum payments, that’s not progress, that’s a treadmill. Increase payments wherever you can. Even small extra payments make a big impact over time.
Invest Early, Invest Often: If you are waiting until you’re “rich enough” to invest, you are doing it backwards. Investing is how most people build wealth.
Thanks to compound interest, your money makes more money while you sleep, similar to passive income.
Start with:
- Your 401(k) plan, especially if your employer matches contributions.
- Roth IRA, since it means tax-free growth and withdrawals in retirement.
- Index funds that are low-cost, diversified, and perfect for beginners.
You don’t need thousands of dollars. You can start investing with as little as $50 a month. The key is consistency.
Budget Like You Mean It, But Keep It Flexible: Budgets get a bad rap. Most people think a budget is a punishment for being irresponsible. That is just incorrect. A good budget is a permission slip to spend intentionally.
You can use the 50/30/20 rule as a starting point:
- 50 percent of your income goes to your needs, including housing, food, and transportation.
- 30 percent goes to your wants, such as entertainment, travel, Starbucks latte.
- 20 percent goes to your savings and debt repayment.
Keep in mind that things do come up in life, so adjust when you need to. Just keep track so you always know where you are with everything.
Protect What You’re Building: Wealth isn’t just about making money; it is also about keeping it. That means having insurance, estate planning, and an emergency fund in place.
- Your emergency plan should be equal to three to six months’ worth of expenses in a separate savings account.
- You should have health, renters’ or homeowners’, life, and disability insurance in place at all times. This is not optional.
- It is a good idea to have a will or trust in place, even if you’re not rich (yet). This is because you never know what may happen, and you want to protect your assets and your family.
- Remember, one emergency without a plan can wipe out years of progress.
Upgrade Your Money Mindset: If you believe you will always be broke, chances are, you will be. Money mindset is huge. The way you think about wealth affects how you treat money.
You should start replacing limiting beliefs with positive beliefs regarding money and your financial well-being. For example, instead of, “I will never have enough, replace it with, “I can learn to manage what I have and grow from there.”
Stop Comparing, Start Planning: It’s easy to feel like you’re behind when everyone on Instagram is living their best life. Remember, your wealth journey is yours.
Instead of asking, “Why am I not there yet?” ask, “What can I do this month to get closer?”
Track your progress like it’s a game. Celebrate the small wins. Adjust your strategy and keep moving forward.
Multiple Streams of Income Equal Money Security: One job provides only one income, which can mean one point of failure. If you want to really build wealth, you need to have several income streams.
Some examples of income streams include freelance work or side gigs, rental income, digital products or content creation, or opening a small business. The goal isn’t to work 24/7, it’s to diversify your income.
Make Your Wealth About More Than Just You: Ultimately, real wealth is about freedom. Freedom to live the life you want, help others, support causes you care about, and leave something behind for future generations.
As you build, think about how you can use your wealth to support your family, contribute to your community, and leave a legacy that actually matters. When money has a purpose, it becomes power.