First things first. You can't build wealth if you don't save money, and you can't save money if you don't know what you have and how you spend it. You probably already know the basics of how to do a budget — and if you don't, click on the link above — so we won't bore you with the nitty gritty. The big picture to remember is that setting a reasonable budget that you can stick to and learn from is a huge (!) step towards the ultimate financial independence.;
, How much you set aside is up to you. Some swear by 10% to 15%, others by figures a little higher.But the younger you start saving, the more time you spend saving, and the less you probably need to put away. So start saving early, even if you're only setting aside 10%.


Another rule of thumb that people use is the rule of 8x. This rule of thumb recommends that you save 8 times the salary you have by the time you retire. By this yardstick, you'd do well to have 1x your salary saved by age 35, 3x your salary saved by 3X by 45, and 5X by 55.
 Few things in life are free, and money is not often one of them. In fact, money is so rarely free that you really have to grab the bull by the horns when it comes along. Here's one situation in which people earn "free" money:


Employers sometimes match 401(k) plans. This means that for every dollar of your salary that you put into your 401(k) plan, your employer will put in another dollar from their pocket. Hypothetically, if you contribute $2,500 to your 401(k) and your employer matches, they'll also pay out $2,500 for a total of $5,000. That's the closest thing to "free" money you'll probably ever get. Take advantage of it.If you want to learn more about 401(k) plans, click here. A 401(k) plan is retirement account where the money you put into it is tax deferred, meaning it's not taxed until a later date or possibly not at all.
 Like a 401(k), a Roth IRA is a retirement account that gets invested and potentially isn't taxed. There's an individual limit to how much you can contribute to your IRA annually ($5,000), but a goal you might have — especially in your 20s and 30s — is to hit this max contribution every year.


Here's how effectively a Roth IRA can help you build wealth. If a 20-year-old person contributes the maximum $5,000 to their IRA every year for 45 years at 8% annual growth, magic things happen. By the time they retire, they'll have a portfolio of over $1.93 million.That's $1.7 million more than if you'd just stuck that money into a regular savings account.
How do Roth IRAs produce such wonderful wealth? Through compound interest. This is how compound interest works. A bank or other institution gives you interest on your IRA, but instead of pocketing that interest, you put it back into your pool. Then, the next time you get interest, you're not only gaining interest, but interest from your interest as well.
As with all savings vehicles, the earlier you start, the better. If you make a one-time contribution of $5,000 at age 20 and then let it sit for 45 years at 8% growth, you'd have a whopping $160,000. If, on the other hand, you make a one-time contribution of $5,000 at age 39, by retirement age that $5,000 would only be about $40,000. So start early!

, While credit cards can be incredibly useful in some situations, they can promote really bad financial behavior in others. That's because credit cards can encourage people to spend money they don't have, to push very real worries farther out into the future until they finally become unavoidable.


Not only this, scientists have discovered that the human brain thinks about credit and real money very differently. One study found that credit card users outspent cash users by an average of 12% to 18%, while McDonald's found that people who pay with plastic spend an average of $2.50 more in their stores than their cash counterparts. Why is this?
We don't know for sure, but we think that cold, hard cash feels a lot more like "money" than credit cards do, perhaps because the money isn't physically present when you swipe the card. In short, credit can feel like Monopoly money — fake — in the primitive part of our brains.
 When the government issues a tax refund at the beginning of the year, many people go on a spending spree. They think, "Hey, here's this windfall. Why don't I spend it and have some fun with it?" While this is a perfectly acceptable thing to do on occasion (and given good circumstances), it doesn't exactly help you build wealth. Instead of spending the tax refund, try to save it, invest it, or use it to pay off significant debts that you have. It may not feel as good as spending it on a new set of deck chairs or a rebuilt kitchen, but it will help you achieve your goal of preparing for the future.
 We know saving is hard. Incredibly hard. By its very nature, saving is deferring present pleasure for future gain, and that's a courageous act. By tilting your head and looking at the process from a different angle, you can motivate yourself to be a much better saver. Here are a couple pointers:


Whenever you make a bigger purchase, divide the cost of the item into your hourly wage.So if you're eyeing those $300 pair of shoes, but you only make $12/hour, that's 25 hours of work, or more than half a work week. Are the shoes worth that much to you? Sometimes, they will be.
Cut your savings goals into smaller chunks. Instead of setting a goal of saving $5,500 per year, think in terms of months, weeks, or even days. Think, "Today I'm going to try to save $15 and put it away." If you do that for every day of the year, that will turn into $5,500.
 Have you ever heard the phrase "It takes money to make money?" Well, when it comes to a good financial planner, that's often the case. A financial planner will cost you money, especially if she's a good one. But the idea is that she'll ultimately make you more money than she charges. By that measure, it's a good investment. It will help you build wealth.


A good financial planner does a whole lot more than manage your money. She teaches you about investment strategies, explains short- and long-term goals, helps you develop a healthy emotional and rational relationship with wealth, and tells you when to spend some of your hard-earned shekels.
 Investing your portfolio is crucial if you want to build, and not just maintain, your wealth. There are tons of different ways to invest, and investing in the stock market a good financial planner will be able to guide you in the right direction. Here are some ways to think about investing:


Think about investing in an index. If you invest in the S&P 500, for example, or the Dow Jones, what you're doing is betting on the American economy to succeed. Many investors think that dumping money into an index is a relatively safe and smart bet.
Think about investing in a mutual fund. A mutual fund is a collection stocks or bonds that are bundled together to pool risk. While they tend not to make as much money as dumping all your money into one or two stocks, it's much less risky.
 You may think that you can make a killing off the stock market by buying low and selling high each and every day, but time will eventually catch up to you and prove you wrong. Even if you marshall solid business fundamentals, industry health, or other value-investing tenets when making your picks, what you're doing is essentially speculating, or gambling, instead of investing. And when it comes to gambling, the house almost always wins.


A mountain of academic research has found that day trading is not profitable.Not only are you incurring big transaction fees each and every day, but you're usually only seeing 25% and 50% increases — if you're lucky. It's very hard to time the stock market correctly. The people who simply choose good stocks and leave their money invested for long periods of time usually make far more money than people who flit back and forth buying and selling.
 For a long, long time, United States stocks and bonds were the most lucrative thing you could invest in. Now, emerging markets are offering more growth in certain sectors.Investing in foreign stocks or bonds will round out your portfolio and give it the risk reduction that you might not otherwise find.
 Investing in property and real estate can be a lucrative way to boost your wealth, but not necessarily. The class of people who believed that the value of real estate would only increase lay at the heart of the Great Recession of 2008. People soon found the values of their houses plummeting as credit became severely pinched. Since the market stabilized, many more are again jumping into the housing market as a means to build wealth. Here are some tips you can use if you do choose to invest in property:


Consider buying a home you can afford and building equity in it instead of paying rent. Buying a mortgage is probably one of the single most expensive purchases you'll make in your life, but that shouldn't dissuade you from buying a home you can afford if the financials make sense. Because why pay hundreds or thousands of dollars in rent to a landlord with no property to show instead of building equity in something that you can one day fully call your own? If you're financially ready to own a home (they cost a lot of money to upkeep), this can be a sound move.

Flip homes with caution. Be wary about flipping. Flipping is when you buy a house, quickly upgrade it for as little money as possible, and then put the upgraded house on the market so that you can make a profit. Houses can be flipped, and some have done so profitably, but houses can also founder on the market for a long time, become money pits, or simply cost more than someone is willing to pay for them.
 This is one of the hardest lessons people attempt to learn as they learn more about personal finance. Live within your means now in order to live above your means later. If you live beyond your means now, expect to live below it in the future. For most people, it's easier to move up the ranks comfort instead of down.
 You may want that brand new car after you see your best friend driving downtown with a slick pair of wheels, but that's your emotional half talking, not your rational half. Here's what you do if you feel the emotional impulse to buy something that your rational half knows you maybe shouldn't:


Institute a mandatory waiting period. Wait at least a week, possibly even to the end of the month when you have a better idea of what your finances will be. If you still want to buy the item after a week or longer, it's probably not an impulse buy anymore., Several studies have shown that people who shop while they're hungry buy more than they need as well as more caloric foods.So eat before you leave to go grocery shopping, and make a list. Then, at the grocery store, only buy the items on your list, giving yourself one or two exceptions. That way, you'll buy what you need, not what you think you may need. Remember, research suggests that approximately 12% of what you purchase at the grocery store will end up thrown out anyway, so do not add to the expense of purchasing items that you will not eat.
 Instead of buying one box of Kleenex that you know you'll run through in a month, get smart and buy a year's supply. Retailers heavily discount items bought in bulk, passing the savings onto you.And if you're really looking for the most bang for your bulk, check out prices online before you buy in person. Online prices are often much cheaper because retailers don't have to pay for as much labor or show space — only warehousing.
 If buying lunch costs $10 on average and bringing lunch only costs $5 on average, that's a savings of $1,300 over the course of a year. That's more than enough to start a small rainy day or emergency fund in case you suffer any unexpected costs or lose your job. Of course, you want to balance thriftiness with sociability, so carve out a little time and money to eat out with your co-workers every once in a while.
 Refinancing your mortgage can shave thousands of dollars off your monthly payments over the life of the loan. Especially if you started off with an adjustable rate mortgage (ARM) and your interest rates have gotten more expensive to deal with, you should consider refinancing.
 If you find that your skills limit your earning potential consider going back to school. Trade school and community colleges have so much more to offer for your dollar. If your interest lies in the computer industry, for example, many community colleges offer computer certification tests.


The tuition and fees are usually less expensive and the training consumes less time than traditional degrees because you don't have to take basic courses like math, English and history to get a technology or skills degree! As a bonus you can take many required courses for a two year degree online.
Also, it's worth noting, you shouldn't underestimate the power of an associates degree. After all many employers just want to see that you can finish your program and be self-motivated to improve yourself, while others just want "the paper."

, Don't be afraid of office politics; “scratching” someone else's back an in order to have yours “scratched” could be a very good thing.
 Keep tabs on community endeavors such as the local chamber of commerce and the Small Business Association. Spend time volunteering there, talking with members, and giving back to your community. Just like with networking, you never know how you might impact a life, or how they might impact yours. It pays to have a lot of lines in the water when fishing.
 After learning the delicate dance of scrimping and saving, of sacrificing for your future, it's good to remind yourself that once in a while, it's good to spend. Because, after all, money isn't an end in itself. It is a means to an end, and its true value lies in what you can buy with it, not in how much you have by the time you die. So learn to treat yourself to life's simple and not-so-simple pleasures once in a while — a ticket to Verdi, a trip to China, a pair of leather shoes. That way, you can also learn to enjoy life while you're living it.
Sit down and make a budget.
Set aside part of every paycheck you earn.
Take advantage of "free" money.
Put money into a Roth IRA — early!,
Wean yourself off of credit and debit cards.
Save your tax refund, or at least spend it wisely.
Change your perspective about saving.
Talk to a certified financial planner.
Decide if you want to start investing parts of your portfolio.
Try not to get tangled up in day trading.
Consider putting money into foreign or emerging markets.
Consider investing in real estate — with a couple caveats.
Live within your means.
Never purchase expensive items on impulse.
Don't go grocery shopping when you're hungry and, for God's sake, make a list.
Buy items online, and in bulk!,
Bring lunch to work more often than not.
If you have a house with a mortgage, refinance your mortgage to save a lot of money.
Learn to earn.
Continue to network with peers in the industry.
Support community cooperation.
Learn to use your money.
{"src": "wikihow-all_test", "title": "How to Build Wealth"}