20 Rules for Building Wealth That Stand the Test of Time

Building wealth requires much research and deliberation; you can’t become an instant millionaire from the get-go, but you have to take the first step. While starting young gives you a leg up, it’s never too late to make financially smart choices.

1. Financial Foresight

Everyone has unique ideas about wealth, so defining your financial goals is the best way to start. When do you plan to retire? What significant purchases are you looking at? Do you need to pay off any debts? Let your circumstances serve as prompts to your planning process.

2. Befriending Budgeting

While this is a no-brainer in the finance world, many people take budgeting for granted. After establishing your financial goals, the next step is to draw up a plan for your expenses. A study by Ramsey Solutions suggests that 93% of millionaires stick to their budgets. Wealth begins with sticking to your budget.

3. Defeat the Debt

It's essential to get rid of your debt before you can amass wealth. While it may be tempting to pay off your low-interest loans first, experts at Forbes suggest employing the debt avalanche method. This way, you make maximum payments on your highest-interest debts and a minimum on your lower-interest ones.

4. Safety First

A crucial aspect of building wealth is having an emergency fund. Keep it separate from your stocks or investments since it should be readily accessible. This fund will be your safety net, preventing you from taking out high-interest loans.

5. Start a Taxable Brokerage Account

Start investing as early as possible. If you want to hand-pick your investments, Forbes recommends consulting online brokers to ease you into the process. With their help, you can find ways to start small, minimize risk, and use resources to your advantage.

6. Retirement Rodeo

While many people have a 401(k) account, an individual retirement account (IRA) is also an additional option worth considering. Ramsey Solutions recommends investing 15% of your gross income in your retirement accounts for a secure future.

7. Portfolio Perils

Never put all your eggs in one basket, and in terms of investing, this means having a diverse portfolio. Investopedia describes the process as spreading your investment funds across different channels. Understanding asset allocation lets you put your money in all the right places without fretting over high risks.

8. FIRE

FIRE or Financial Independence, Retire Early is a principal motto for those building wealth. According to Time Magazine, this movement originated in 1992 following the publication of Your Money or Your Life by Vicki Robin and Joe Dominguez. The goal is to cut costs and increase investments until you can live comfortably without having to work.

9. Income Increase

While changing your career to a better-paying one isn’t always an option, you can do several things to increase your current salary. You can negotiate for a raise by documenting your achievements and progress while consistently expanding your skill set. Consider using side earnings to supplement your primary income if this isn't possible.

10. Keeping Tabs

Building wealth is a systematic process, and there are no shortcuts. Hence, keeping track of your spending is a good way of knowing where you stand. Before making big plans about cutting costs or making investments, get acquainted with your spending habits by recording your expenditures. This knowledge will give you clear insight into where your money is going.

11. Needs vs. Wants

Change the lens through which you view your expenditures. When you break your spending into needs and wants, you often find the clarity to make better financial choices. In addition to the mortgage and groceries, insurance qualifies as a need. Once these expenses are out of the way, you can trim the fat and remove unnecessary “wants.”

12. Scammy Schemes

It’s tempting to opt for “quick” money-making schemes, but remember that building wealth is a slow process. If someone tells you that a particular plan is guaranteed to work and has no risk, run in the opposite direction. Make informed, well-researched decisions and seek professional financial advice when in doubt.

13. Setting the Savings

Like setting a budget, set your savings goal, too. While you don’t have to be too stingy, you can do your best to stick to your monthly goals. You can even reward yourself after you've crossed some considerable milestones to motivate yourself.

14. Automation

Don’t trust yourself with manually putting savings in your account. According to Synchrony, you can automate the process by talking to the bank or your employer to transfer a specific amount from your salary into your savings account every so often. You can do the same with your retirement plan.

15. Downsizing

Depending on your stage of life, you might consider downgrading your lifestyle. For instance, if your kids have gone off to college, your empty house might have a few too many rooms. Opting for a smaller, more affordable space without sacrificing basic comfort can save you some money.

16. High-Yield Savings

Just setting aside money for savings isn’t enough. You need to find a high-yield savings account to maximize the payoff.  Investopedia says these accounts have the highest interest rates and lowest fees. Compare the initial deposit and minimum balance requirements when settling on an account.

17. Less Is More

A simple but crucial tip is to live on less than you make. Even if you’re making a decent living, don’t spend it on unnecessary things and save up whenever there is room to do so. For instance, look out for coupons, discounts, and sales instead of blowing cash just because you can.

18. Housing Budget

Your housing budget is imperative to your financial journey. According to Time, as a rule of thumb, don’t spend over 28% of your gross income on housing. For mortgages, you can use payoff calculators to determine how fast you can pay off your mortgage.

19. Untouched Retirement Funds

If you’re on top of your budgeting and money management, you won’t find yourself in the desperate spot of borrowing money from your retirement funds. Ensure you have a backup plan for dealing with unnecessary expenditures instead of dipping into your 401(k).

20. Documentation

Pay attention to the importance of sorting your financial documents, such as estate plans, so your family can access them should something happen to you. If you’re considering building generational wealth, you should draft your will as soon as possible.