The greatest tool for building wealth may not actually be your career. According to 2016 GOBankingRates survey, 69% of Americans have less than $1,000 dollars in savings. The stock market has become the single greatest wealth building tool for Americans, and yet so many are unable to take advantage of this opportunity. Being able to utilize your existing assets to grow through investments in stocks, bonds, mutual funds, and other wealth building options is critical to maintaining your current way of life during retirement.
In order to take advantage of investment opportunities, initial capital is required. Creating a budget is a way that can enable every individual to set aside a portion of their income for investments and retirement. By keeping a detailed account of all purchases and expenditures, it becomes easier to identify areas to save. Budgeting can also help manage debt payment and credit card bills. Avoiding interest is key to paying off debt quickly. For the large portion of Americans that have less than $1,000 in savings, budgeting will help create an emergency fund that will help prevent further debt in event of unforeseen expenses.
Opening a brokerage account and setting up investments has become even easier than ever with a wide variety of trading platforms available. The key to building wealth for retirement is investing early. An investment of just $1,000 compounded over 25 years with a rate of return matching the S&P 500 will result in an ending balance of just over $7,000. Diversifying investments can be a key way to mitigate risk. But taking advantage of strategic investment sectors can prove to be even more lucrative, as big name technology stocks such as Apple, Amazon, Facebook, Alphabet, and Microsoft have comprised 37% of the total gains from the S&P500.
Many individual investors fear that the market will crash. This is one of the biggest reasons why investing at a young age is even more critical. Adjusting investment profiles at an older age can help mitigate this risk, while younger investors will have more time to weather the potential storms.
For those who live in the United States, medical bills can create an enormous strain on their financial resources, and quickly drain savings. This is especially the case for terminal patients. Fortunately life insurance does more than help policyholders’ loved ones after death; it can also help ease the burden of terminal care. According to Beco Life, viatical settlements go for “up to 60-70%% of the face value of the policy.”
One of the traditional options to maintain a life insurance policy and then cash in on this in the future. However, with many companies matching 401k investments, and the ability to contribute annually to a ROTH IRA (which allows investments to grow tax deferred) there are clearly other options for growing your wealth and preparing for retirement. Practicing a careful budget, investing in a diverse portfolio at a young age, and avoiding paying interest on accruing debt are key to a successful and early retirement.