Earning and Saving

Save early and often

Accumulating wealth for financial security is a goal that requires planning and discipline. If you think you have plenty of time “down the road” to start saving, think again. The longer you wait, the harder it will be to accumulate the money you will need to meet your financial goals—and the cost of waiting can be steep.

Wealth accumulation strategies

There are two fundamental principles for any successful wealth accumulation program:

  • Save money regularly and consistently.
  • Develop a sound strategy and stick to it over the long term.

Most experts say you should save at least 10% of your earnings, consistently throughout your earning years.

  • Do you save money consistently?
  • How much are you saving?
  • Where are you saving it?

To develop a sound investment strategy and stick with it, take the following steps:

  • Define your long-term goals. Know where you want to be 10, 20, and even 30 years from now.
  • Know your time horizon. Estimate how much time your money has to grow before you’ll need it.
  • Know your risk tolerance. A higher risk tolerance means you’re willing to ride out fluctuations in the value of your investments in order to potentially achieve higher long-term returns. A lower risk tolerance means you need to see regular and steady growth.
  • Diversify. Spread your investments across several types of financial vehicles such as annuities, mutual funds, stocks and bonds, life insurance, IRAs, and 529 programs, in order to protect against the normal fluctuations in each class of investment. This is known as Asset Allocation. However, it is important to note, there is no assurance that a diversified portfolio will produce better returns than an undiversified portfolio, nor does diversification assure against market loss.

Finding extra money in your budget

Can’t seem to find any extra money in your budget? Here are some tips:

  • Write down every dollar you spend for one month and look for areas where you could cut back.
  • Pay off your high interest debt first and consider consolidating your debt.
  • Pay your credit card balances every month.
  • Pay yourself first. Use automatic payroll deductions or transfers from your checking account to save or invest at least 10% of your earnings each month.
  • Take advantage of tax-deferred saving, using investments such as:
  • Take advantage of dollar cost averaging. Instead of trying to determine the "right time" to invest, make a commitment to invest a set amount each month, which can help reduce the effects of market fluctuations.

Once you have begun to generate earning power, you’ll want to protect it. Read about protecting your earning power.

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