Most people enjoy a challenge. Every now and then, a Mount Everest-sized feat appears and you feel that itch deep inside that dares you to try and conquer the impossible.
So how about this for your next trial? Accumulate enough wealth to reach your first $100,000. (This represents cash savings, investments and home equity.)
We get it, that sounds like an impossibly huge amount of money. Instead, think of it as a major milestone in your adult life. The truth is, you’re probably already hoping to get there one day. Why not be intentional about it and maybe get there a little faster?
We think you deserve a hundred grand. If you agree, here’s the proven plan to help you save and invest your way to glory.
Step 1: Know your net worth: Before you start on your mission to build $100,000 in wealth, the first step is to get a complete picture of your finances. Free tools like Mint.comlet you see all your accounts in one place — checking, savings, investments, debts — and track your progress.
Step 2: Zap debt: If you have debt, especially the non-mortgage kind, then your main focus is to eliminate it. Begin by choosing one account, and pay more than the minimum payment. Eventually, once that account is paid off (ahead of schedule), apply the old monthly payment to the next account. This is called the snowball effect.
Step 3: Automate savings: Always pay yourself first. With automated banking tools, you can build a safety net without thinking about it.
Step 4: Plan smart: Track your expenses for three months, and put your spending into categories: housing, food, restaurants, coffee, etc. Use this as your basis to plan your monthly budget. Ideally, you’ll see opportunities to cut back, and plan for it accordingly.
Step 5: Be frugal: One of the most powerful tools in your wealth-building arsenal is your day-to-day spending choices. If you’re really motivated to build wealth, a willingness to rethink your spending habits will add fuel to your efforts.
Step 6: Use those workplace benefits: If your workplace offers a match for retirement savings, run, don’t walk to HR and get it started. If you have a tight budget, start with a small amount, say, 1 percent, and bump it up every six months until you reach the full match. Be sure and take advantage of other workplace benefits, like health savings accounts.
Step 7: Ladder up: Hopefully, there will be times when money will come your way, whether it’s a pay raise, tax return, work bonus, gift or inheritance. When it does happen, commit to setting aside at least half to wealth-building. Use it for an extra loan payment, add to your emergency fund, sink it into a Roth IRA, or take advantage of rising interest rates and lock it for a few years in a CD.
Saving and investing enough to reach $100,000 is no small feat. Let Minnwest Bank help with our expertise and online tools to manage your saving and spending. Talk to one of our personal bankers today.