Building Wealth

Wealth is not how much you make.
Wealth is how much you have accumulated. Big difference!

We have often talked about the various aspects of building wealth. Today I'll list some of those aspects so you may choose one or two for focus.

How to build wealth starting with THE MOST IMPORTANT:

!. Pay yourself first. Automatic savings, automatic 401k contributions, automatic 529 contributions all give you the advantage of not having to think about it. Build your emergency fund first; without a cushion all your wealth could dissolve with the first crisis.

2. Reduce and eliminate debt. Debt is the antithesis of wealth. It drains you emotionally and physically. Double up on your payments when you can. Or better yet, don't build up debt by using your credit cards wisely and paying them off in full each month.

3. Take full advantage of matching contributions in your 401k or 403b. Employer contributions are free money!

4. Create a plan for spending a windfall like an inheritance or tax return. This is not play money. This is not recurring money like your pay check. It happens rarely. Use it wisely. Plan to spend 10% for fun and use the balance to pay down credit cards, loans or your mortgage.

5. Know what you owe and what you own by creating a Net Worth statement at least once a year. You know your making progress when you compare the numbers year to year and see the growth: Debt (liabilities) diminishing, Assets growing.

6. Create a long-term strategy to build your wealth starting with measurable, attainable, short-term goals like building your emergency fund and paying off credit cards. Then add where you want to be in 5, 10 and 20 years.

7. Get professional help. If you are unsure about saving, investing or debt reduction take a course, read a book, hire a money coach. Your future is too precious to entrust to amateurs.

Be $ Smart - pick one, work to complete it in the next three months. Then pick another to keep you moving forward. You will be so proud of yourself!

Creating an Investment Strategy - Part 3

Over the past few weeks we listed the components for creating a strategy; now is the time to actually write one. The purpose is to keep us on track to build wealth and attain our financial goals and dreams.

It can be as simple or complex as you need it to be. It's YOUR road map.
You may revise it as life moves along.

Below, is an example I found on the Internet. It is very simple and will give you an idea of how to construct yours. Start simply, you may always add to it, and most importantly, PUT IT IN WRITING. It will be your guide to the future. Without a map, who knows where you may land!

If you need some help, feel free to send me an email.

Be $ Smart - Review the previous steps to create your own investment strategy to build wealth and ensure a financially secure future.

Sample Investment Strategy

OBJECTIVE:
Save $1,000,000 for retirement, adjusted for inflation.

CONSTRAINTS:
30 year horizon.
Moderate tolerance for market volatility and loss, no tolerance for nontraditional risk.
Current portfolio value, $50,000.
Monthly net income of $4,000, monthly expenses of $3,000.
Consider the effect of taxes on returns.

SAVING OR SPENDING TARGET:
Willing to contribute $5,000 in the first year.
Intention to raise the contribution by $500 per year to a maximum of $10,000 annually.

ASSET ALLOCATION TARGET:
70% allocated to diversified stock funds, 30% allocated to diversified bond funds.
Allocation to foreign investments as appropriate.

REBALANCING METHODOLOGY:
Rebalance annually.

MONITORING AND EVALUATION:
Periodically evaluate current portfolio value relative to savings target, return expectations, and long-term objective.
Adjust as needed.