Yahoo Finance I’m a Banker: 4 Saving Strategies I Swear By for Long-Term Wealth
When it comes to saving money, there’s no one-size-fits-all strategy. What might work for some people won’t always work for others. Depending on your goals and financial situation, you might be able to save more aggressively than others. Or you might only be able to save small amounts at a time over a long period.
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Whatever the case, if you’re trying to build long-term wealth, it’s crucial to find the savings strategy — or strategies — that work best for you. If you haven’t found yours yet, don’t worry — it’s never too late to get started.
GOBankingRates spoke with Teri Williams, president and COO at OneUnited Bank, about which savings strategies she swears by for long-term wealth — and which ones she would outright avoid. Here’s what she said.
Automate Those Savings
One of the first things Williams suggested was setting up an automatic savings account.
“What wealthy folks know is that you MUST set up an automated process such [as] that funds transfer from your paycheck to a savings/investment account,” she said. “If money goes ‘into your pocket,’ you are more likely to spend it.”
Most banks and credit unions, as well as online banking services, will allow you to connect two accounts — like a checking and savings account — and automate your savings contributions. Depending on your goals and finances, you may be able to set it up to where a certain amount of money gets deposited into your savings account each month. Or you might be able to have a specific percentage of your paycheck put into your savings.
Check over your budget and see how much money you can comfortably save each month. You can always make adjustments as you go, but the important thing is getting started.
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Prioritize Increasing Your Income
If you’re trying to save money to build long-term wealth, you’ve probably been told to cut out that daily latte habit or cancel those extra streaming service subscriptions. And while cutting back on things you don’t need, want or even use doesn’t hurt, it’s not the way to become wealthy.
Instead, Williams suggested focusing on your income over your expenses.
“The wealth gap, as an example, is largely due to the income gap, rather than a difference in how we spend our money,” she said. “Avoiding purchasing a cup of coffee or lunch is not as important as improving your job skills and career path.”
These small cut-backs might help in the moment, but your actual earnings are what are more likely to push you into greater financial stability and wealth over time.
Keep Your Expenses Reasonable
Of course, you don’t want to spend more than you can reasonably afford either. Just because your neighbor or coworker gets something new or expensive doesn’t mean you should automatically follow suit. Your situation is going to be different from theirs — and you might not even know the full story.
“Avoid ‘keeping up with the Jones (or the Kardashians)’! You can see what people own but not what they owe!” said Williams. “Avoid overspending and increasing credit card debt to match what you see on social media. In many instances, the lifestyles you see online are just a mirage.”
Buy Property
More specifically, if you truly want to build long-term wealth, find a way to break free of the rental cycle and buy your home.
“Buy a home, even if it’s a hut!” said Williams. “There are many reasons to own a home, including building home equity and avoiding the increasing cost of rental housing.”
Purchasing a home can be tough, especially if you’re a first-time buyer and don’t currently have one to sell and help with the down payment. But the long-term payoff — no more rent payments, no more interest charges on your loan, the feeling of accomplishment, etc. — is worth it.
“Of course, consult a financial advisor to make the best decision for you and your family,” Williams added.
If you’re not in a position to buy a home right now, build up to it. Increase your savings, work on your credit score and save up for a larger down payment. Find a true starter home, too, one that gives you what you need even if it doesn’t have all the luxurious amenities.
Avoid These Money Moves If You’re Trying To Build Long-Term Wealth
Just as there are some great savings strategies for those who want to build long-term wealth, there are also a few things you shouldn’t do. Here are some of the biggest ones, according to Williams.
Don’t fall for scams. “Avoid scams! If it sounds too good to be true, it probably is! There has been an increase in fraud attempts with ‘get rich quick’ schemes. Do not believe them! Do not give them money or credentials to access your bank accounts,” she said.
Don’t give money to loved ones if you can’t afford it. “Do not invest money with friends that you are not willing to lose,” she said. “Your family and friend relationships are more important!”
Don’t put all your money in investments. “Have some money in FDIC-insured savings accounts,” said Williams. “Yes, investments are great, but they require risk-taking. You need to have a cushion for emergencies.”
Long-term wealth is just that — something that takes time to accumulate. But by practicing mindful spending, automating your savings, increasing your income and, when the time is right, buying a house, it’s entirely doable.
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This article originally appeared on GOBankingRates.com: I’m a Banker: 4 Saving Strategies I Swear By for Long-Term Wealth
