Back with the regularly scheduled programming. In this episode, we talk about consistent simple steps that we should take in order to build wealth.
1. Get an Emergency Fund. Open a high interest savings account with a bank like Ally or Marcus or Simple or so many other internet banks. Where you can literally park some money. Now it's not fancy but the peace of mind you get from this will be mind blowing. In the US, 59% of people cannot cover an emergency expense of under $1000. This is to protect you from that unfortunate event happening.
2. Invest in yourself. Get a skill or start a business or get a certification in something. Find a way to leverage yourself into something you love to do cause this will fuel you to do more. This will also provide you with another source of revenue to continue to build wealth
3. Pay off loans that have a higher than 4% interest rate on it. Aka Credit cards, car loans student loans, etc. Now I know this doesn't make much sense but when you compare the rate of return in investing of about 8% on a good year versus a credit car that continues to rack up at more than 15%. You start realizing one makes more sense to do. Plus with investing you aren't even guaranteed that rate if return. At least you can guarantee that you are getting back that 4% interest or higher.
4. Now Otherwise, open a Roth IRA account and invest in Index Funds. Before we get into what to invest in a quick caveat if you have a job where they offer a 401(k) match. Do that first. Max this option out first. Because this is the easiest way to double your money. Depending on what your company offers it can be anywhere from 50¢ to the $1 for $1 match. So before anything else do this. Okay back to the IRA. I advice most people to invest in something like a Target Date Index Fund. This is a mutual fund that is designed to grow and change as you change. Basically going from all risk assets to less risky assets as you get older. But if you don't like this and want more control then get ETFs that tracks the market. Start with one that track the S&P 500 like SPLG or Total Market like VTI. Then I would also add something that tracks the international market like VXUS.
5. If you can, get a HSA account. This is a Health Savings Account that can also be used as an additional IRA to invest some more. This is also tax free growth.
6. If you can't open a HSA, I say open a 529 Savings account for your kids. And you can begin teaching them about saving and investing etc.
7. Now I need to say this. None of these things in and of themselves will make you rich overnight. Just won't happen. There is no real shortcut to turn $1000 to $100,000. The only way to speed up the process is to invest more and save more.
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Simple Steps to Build Wealth