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One of the biggest challenges I have ever faced is growing my own bank account. And what was the problem? The answer comes down to this…being real with myself. Landing great, sought-after jobs has not been very tough. However, I have struggled with staying the course of those roles while building wealth. Like for so many Millennials and Gen Xers, saving and investing, two key ingredients in the recipe for building wealth, have been difficult to master.
In 20/20 hindsight, overcoming these hurdles seems so clear. It comes down to not just knowing yourself, but what you truly have financially and what you want in the future. I have learned through numerous attempts to get on the road to Invibed bliss, I took a couple too many detours. I sincerely want to help readers not get lost on their journey to find financial happiness.
When putting together this article, I sought out the advice of three financial experts who have different specialties. After having a few conversations with these no-BS professionals, I believe it’s safe to say that building wealth comes down to knowing what you want, what you have and what you know. I suggest you answer the three questions below if building wealth has also been a struggle for you.
What Do You Want?
Earlier this year, I sat down with Associated Benefit Consultants financial advisor Nick Domino and he guided me on a tour of my own financial past.
Domino kicked off our conversation with asking, “Why do you do what you do for work?”
I answered that I am familiar with what I do, I like it, and it gives me security (money).
Just in saying this I realized I need to be happy with what I am doing to be successful. If I am engaged by what I do, it is easier to stay focused and stick with a career path, and ultimately grow my earning power. But happiness often comes at a price, and you may care less about having a fulfilling career and more about a large paycheck. The key is to find your balance between happiness and earning potential. You also want to make sure today's actions are supporting tomorrow's goals.
Domino asked me what my ultimate goals were and how much they may cost in the long run. I responded that I would like to have children, build my own businesses, further my education and buy a house.
He asked me if what I am currently doing will get me to those goals. And he wanted me to keep it real – to look at what I am making per year, my spending habits, and how much I am saving each month.
He asked me to look at all of these details to see if I truly can reach my ultimate goals.
I learned that if I want to achieve these things in the future, I need to find ways to save money for them today. If I am taking a lower salary to do something I love, that money has to come from somewhere else. One easy way to free up money for goals is to reduce spending on frequent purchases. For example, he said wine lovers may want to join an online, less expensive wine club and forgo the in-store experience. The savings on these everyday purchases can be put away in a systematic way that supports your goals.
What do you want? Have an honest conversation with yourself and identify what actions you need to take to achieve your future goals. Whether that is a career change or new spending habits.
If you are contemplating a less-fulfilling but higher salary career, keep in mind that happiness comes at a price but it is possible to live a passionate life doing work in a less lucrative field. It may just require patience as your position grows into a more successful (and better paying) role or having a strong hold on your savings plan. The key is to find balance once you have a clear understanding of what you want.
What Do You Have?
Winners keep score. Domino advised me to be truly aware of how much I make after-tax and take a hard look at my financial situation by the numbers.
He assessed what I am spending and able to save, and areas where I could save more by making some lifestyle changes. The point of this was to see if I could actually achieve my goals if I stayed on the same track. Everyone should know their real income, living expenses, and monthly spending habits.
Once you know what you want, it's important to see what you have. With this information, you can see where you are lacking when it comes to your financial goals and determine your biggest concerns.
If you're like many Americans, having enough money for daily expenses may be your top financial goal. I spoke to survey expert Bob Shullman, Founder and CEO of the Shullman Research Center. According to surveys from Shullman's Firms, the top goal of all generations surveyed (including baby boomers, Gen X, and seniors) is having enough money for daily expenses. For millennials, the second top goal is improving their standard of living. The third top goal is having enough bucks for emergency expenses.
Also, as per Shullman’s study, millennials’ top concerns are being out of work and finding a good job, followed by health awareness.
Do you have enough to achieve your goals and alleviate your concerns?
For you, this might be a separate choice spending account to cover daily expenses and an emergency fund to support you if you lose your job or have an unexpected medical expense.
Numbers don’t lie. When building wealth, it is important to know what you have (and if it can get you to what you want).
What Do You Know?
Knowledge is power. It's important to have a good personal finance education so that you can be confident in the decisions you make around money.
Investing is a big part of building wealth but picking stocks can be a gamble and not something you visit unless you know what you're doing and have discretionary income to lose.
I spoke with international Investor Jim Rogers to see what he had to stay about investing in stocks. Rogers emphasized to not invest until you know a lot about something…what’s that something? Perhaps it’s a new delivery service you have used for months and continuously love the experience. Rogers advises millennials not to invest until they know a lot about something. Do your homework, research and look at companies that really interest you when putting together a small stock portfolio. He advised me to look at it like a lifetime portfolio where you park your money and let it sit and grow. And if you deem your mistakes here and there…it’s ok because this is money you have allotted to be able to invest, not something you depend on for survival.
And sometimes it’s just better not to invest. He told me to keep in mind many investors lose money. And the less money you have to play with, the easier it may be to get more emotional and anxious as the stocks fluctuate. This can lead to making the mistake of selling low and buying high instead of the opposite.
When making personal finance decisions and determining how and where to invest your money, it's important to educate yourself first and be in the know.
To recap these points, what stands out to me about building wealth is what you want, what you have and what you know. While reading this article, you should have asked yourself:
-Why do you do what you do?
– What are your goals?
– What do you have?
– What do you lack financially?
– What are your financial concerns?
– What do you know about personal finance and investing?
Consider the answers to these questions stepping stones on your journey to building wealth and growing your bank account.