Why You Should Focus on Building Wealth...Instead of Just Saving Money (2024)
By Stacy Williams
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Stop the presses! I know. I’m late on this post today. It happens. 😀 Why am I late? Because I was doing some work for a few other bloggers. That’s okay. Like I said. It happens. Next time, I’ll plan my schedule better. Aside from the fact that I’m late, maybe you’re wondering WHY I was working for other bloggers?It’s not because I desperately need the cash. While any cash is great, it’s simply because I want MORE cash than I have now. Why do I want more money? Because I’m trying to build wealth for my family…and you should be too.
Building wealth for ourselves and our families is so important. Except we are also told that saving money is too. Figuring out which one is correct can be a truly mind-blowing experience for some…especially if you’re new to the whole shebang.
Let me help you bust through the confusion…they’re BOTH right.
When we look at building our financial lives we need to not only be looking at saving for emergencies, but also building our retirement and building wealth at the same time. By doing so, we ensure that we have a fund set aside for whatever life seems to throw at you and that when it’s time to retire or quit working, you’ll have enough to live comfortably. Savings alone won’t provide the life that we are looking for, but neither will wealth. I don’t know about you, but for me personally, I want to know that not only are those emergencies and my “wants” are covered, but that there is enough money in the account to cover any regular expenses that we may have as well as enough to retire on. I’m not getting any younger and even though I’m only 33, retirement has been on my mind a lot lately.
Savings accounts, while they’re a must have? They don’t grow very well. Even a money market account, which typically has a higher interest rate than a regular savings account, won’t grow for you the way that an investment can. So your money kind of just sits in that account, accruing a few pennies a year interest when it could be out earning for itself. That’s why it’s so important to do both. Yes, keep your savings accounts. Build them up to where you could live off of them if you needed to, but take the rest of your money and plant it. If each dollar is a seed then plant them deep so that eventually you do have the proverbial money tree.
So how do you do both? It’s not as hard as you may think.
To start with you’ll want to build your emergency fund first. This one is by far the most important of the two accounts. You’ll want to build it up to $1,000 as quickly as you can. This may not be as hard as you think since just $16.66 per day can help you get there in just 2 months. You must have these funds set aside for those pop up emergencies like car repair or a sudden family trip. Once that is set up, think about other savings that you might need. Do you want 3-6 months of living expenses in the bank? Do you want to have an account set aside for a new car? Whatever it is, make sure that you have the accounts for them taken care of and at least half full before you start to work on building wealth.
Once you’ve got that taken care of, it’s time to move on to building your retirement and building wealth. I love the text message method that I use, but if that isn’t something you want to look at doing, consider talking with a financial advisor. Investments are a great way to build your financial portfolio. For new investors, go with something a bit “safer” like a bond or a money market account (although do keep in mind that there are no truly safe investments and that everyone carries risk). Bonds are easily to understand though and depending on what you pay for the bonds themselves can net a nice, tidy profit for you.
As you’re building your portfolio, be sure that you don’t forget to save too. Doubling up on what you’re doing financially is never a bad thing (unless you’re doubling up on spending of course). Continue to save, continue to build and when you’re ready? You will have built a financial future for yourself and your family like you’ve never imagined.
By doing so, we ensure that we have a fund set aside for whatever life seems to throw at you and that when it's time to retire or quit working, you'll have enough to live comfortably. Savings alone won't provide the life that we are looking for, but neither will wealth.
Learning how to build wealth is essential for financial security and independence. If you have financial goals, such as buying a house, paying for your kids' college or securing a comfortable retirement, building wealth is the key to achieving those objectives.
Investing provides the potential for (significantly) higher returns than saving. As your investments grow, they allow you to take advantage of compounding to accelerate gains. Investing offers many different access points and strategies, from individual stocks and bonds to mutual or exchange-traded funds.
In general, you should save to preserve your money and invest to grow your money. Depending on your specific goals and when you plan to reach them, you may choose to do both. “When deciding whether to save or invest your money, it is essential to prioritize determining when you will need it,” says Maizes.
Having money makes it possible for you to start a business, build a dream home, pay the costs associated with having a family, or accomplish other goals you believe will help you live a better life. Money gives you security.
Being rich may sound like the dream, but it's not a guarantee for long-term financial security. To truly secure your financial future, it's important to aim for wealth. Wealth provides a sense of financial freedom and stability that being rich cannot always offer.
While get-rich-quick schemes sometimes may be enticing, the tried-and-true way to build wealth is through regular saving and investing—and patiently allowing that money to grow over time. It's fine to start small. The important thing is to start and to start early. Earn money and then save and invest it smartly.
The simple rule: If you need the money in the next three years, then save it ideally in a high-yield savings account or CD. If your goal is further out, or you don't have a specific need for the money, then start thinking about investing in something that will grow more, like stocks or bonds.
The future is unpredictable, and financial emergencies can crop up anytime. Saving money allows you to create a safety net for your future expenses as well as unplanned financial needs. The more you save, the more peace of mind you have, as you are better prepared for anything life throws at you.
In contrast to happiness, Kahneman and Deaton found that life satisfaction increased steadily with income with no plateau. In other words, the more money people make, the more satisfied they are with their lives.
The importance of saving money is simple: It allows you to enjoy greater security in your life. If you have cash set aside for emergencies, you have a fallback should something unexpected happen. And, if you have savings set aside for discretionary expenses, you may be able to take risks or try new things.
In a new report, the Milken Institute recommends that Americans start investing for their retirement at age 25. Saving $100 a week as of that tender age will, by the power of compounding, yield $1.1 million by age 65 (assuming a 7% annual rate of return).
Money is definitely a key to a good life but it is also an ever ending goal that will lead you to resentment. You will only work to increase your income and keep on acquiring more and more assets. You might become very rich and yet remain unsatisfied in life.
Using a savings account and an emergency fund for short-term expenses is important, but investing for retirement and the future is arguably just as crucial. While it may feel pointless to start investing if you don't have much money, it can still be incredibly worthwhile.
Aim for building the fund to three months of expenses, then splitting your savings between a savings account and investments until you have six to eight months' worth tucked away. After that, your savings should go into retirement and other goals—investing in something that earns more than a bank account.
Capital investment allows for research and development, a first step to taking new products and services to the market. Additional or improved capital goods increase labor productivity by making companies more efficient. Newer equipment or factories lead to more products being produced at a faster rate.
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