Smart Money Goals Part 2: Five Strategies for Building Wealth

One goal that resonates with many Americans is becoming wealthy, although that means different things to different people—for some, it’s comfort and security, for others lottery-winner-level luxury. Get-rich-quick scenarios aside, for most of us, the key to making that wish for wealth a reality is disciplined saving and investing. In Part I of our Smart Money Goals post, the emphasis was on fundamental approaches to setting yourself up for future financial success. Now in Part II we delve into five tactics to help grow your affluence over time.

• Automate your savings

Accumulating savings is a precursor to investing. To ensure consistent contributions to your wealth-building journey, automate your savings. Through your employer or your bank, arrange automatic transfers of a portion of every paycheck into separate savings or retirement accounts. If your employer offers a 401(k) or similar plan, have your contribution automatically withdrawn from your paycheck and deposited into your account. Financial advisers recommend contributing at least enough to maximize your employer’s matching contribution in retirement plans.

• Reminder to rebalance

Out of sight is not out of mind. Even though your deposits are set up to operate without much input, it’s important to periodically revisit your accounts and adjust them as necessary. Schedule a quarterly, semi-annual or annual fine-tuning session.

• Bump up the savings rate

From time to time, boost your savings percentage, especially when you receive a raise or a bonus. These small increases can pay off over the long term. Take advantage of money market accounts that earn interest. If you won’t need access to your money for several months, CDs can be a good option.

• Invest for growth

​​​​​​​While savings accounts offer security, inflation may outpace any interest you earn. For a greater payoff, you can put your capital to work with investments—a good place to start is with the basics: stocks, bonds and mutual funds. Since all types of investments perform differently, and investing carries inherent risk, spreading your capital around into diverse types of investments can be a sound tactic. Attempting to predict what’s going to happen with the stock market is risky. A safer approach is practicing discipline by staying invested in a diversified portfolio, even during downturns.

• Watch out for the fees

​​​​​​​​​​​​​​Different investments include different kinds of costs—expense ratios, custodian and maintenance fees, and loads and commissions are just a few. It’s worth educating yourself about what types of costs are associated with your investments, and to recognize that these costs that start out as a small percentage can add up fast, especially as your investment grows in value. Choosing lower cost purchases will soften the sticker shock.

Building wealth is a long-term goal: Earning interest and making wise investments puts your money to work for you behind the scenes, while you go on about your life. Strategic financial habits will help you pave the way and weather setbacks on your way to achieving financial success. Visit your local WaterStone Bank branch to speak with a banker and learn how you can start taking steps to building wealth.