The Top 7 Ways To Build and Preserve Wealth Over Time, According to Experts
Getting money is fairly easy. Growing money takes a little more thought and consideration. And preserving the wealth you create for years to come takes strategy. While we’d all like a lump sum of funds deposited into our bank accounts and to sit back for the rest of our lives, money does not work like that. It takes effort, oversight and some careful thought to create wealth that can be maintained throughout the years.
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GOBankingRates asked a few experts about the top seven ways to build and preserve wealth over time.
Get Insurance
“Ensure you have proper insurance coverage so that you are not wiped out financially from some catastrophic event,” said Chris Urban, CFP, RICP, the founder of Discovery Wealth Planning.
This includes all the major categories, such as health, home, auto, umbrella and life, so if the worst should happen, you are covered financially.
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Invest Wisely
“Of course investing is fairly crucial for growing your wealth, but it’s important to do it wisely and with the proper guidance,” said Connor Carnduff, CFP, a financial advisor at Broadway Graham Wealth Partners.
“Having a strategy to diversify your investments across different asset classes — think things like stocks, bonds, alternative investments, etc. — helps to spread risk,” Carnduff explained.
Carnduff said this is where having a financial professional you trust and can rely on makes the difference.
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Plan Your Estate
“Have the essential estate planning documents in place to ensure that the wealth you have built up is preserved, should anything happen to you,” Urban said.
These documents may include a will, trust, advanced medical directives, powers of attorney and other crucial information to keep your wealth safe.
Manage Fees
According to Urban, keep fees as reasonable as possible.
“When working with professional service firms, such as accountants, financial advisors, estate attorneys, insurance agents, etc., I recommend having a very good understanding of what you are receiving for their service and what it costs,” said Urban.
“In other words, make sure the cost/benefit is worth the relationship,” he added.
Live Within Your Means
“This might sound simple,” Carnduff said, “but living within your means is a fundamental practice for building wealth. You want to avoid the trap of lifestyle inflation.”
As an example, Carnduff said, “Don’t increase your spending just because your income goes up. Instead, have a strategy to route these funds into savings or investments.”
While it can be hard, Carnduff said you need to make deliberate choices with your money, prioritizing long-term goals over short-term gratification.
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Take Taxes Into Account
“While earning an income(s) and accumulating wealth, it is somewhat difficult to do much about how much tax you have to pay,” Urban said. “However, once you get to retirement and/or scale back on how much income you have, there are certainly strategies to reduce the amount of taxes you will have to pay on your nest egg.
“Think carefully about this and come up with a good long-term plan,” he said.
Save and Invest Early
Urban recommended saving as much as possible, as early as possible, and Cardnuff agreed wholeheartedly.
“The power of compound interest is a game-changer. The earlier you start, the more your money can grow,” Cardnuff said.
“This includes contributing to retirement and investment accounts as soon as you start earning income and/or have assets to invest,” Urban explained, citing a life event such as an inheritance that could potentially bring some additional money into your life, plus more if used right.
Carnduff pointed out that consistency is a major factor in building wealth, even if you start small. “[Automate] your savings by setting up regular contributions to your retirement accounts or savings fund. This way, you’ll build wealth without having to think about it constantly.”
Urban added, “Understand the core concepts around what types of accounts to invest in — i.e. traditional IRA/401(k) vs. Roth IRA/401(k), etc. — and what types of investments make sense for you and your short, medium and long-term goals.”
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