Building Lasting Wealth
If you’ve been considering stepping into the world of investment, you’re not alone. Investing can be a smart way to grow your wealth, but it’s essential not to rush into it. Before diving in, you need to solidify your savings, research your investment strategy, assess your risk tolerance and choose trustworthy organizations.
Here are six steps that will help guide you toward your financial goals.
Pay yourself first
A solid emergency fund is the cornerstone of financial security. Financial experts recommend saving three to six months’ worth of living expenses to help you navigate unexpected events without sinking into debt.
To ensure consistent progress, automate your savings. Set up a direct transfer to your emergency fund as soon as you get paid so that this is the first priority. Keep this automatic transfer running until your emergency savings are fully built. Once that’s in place, you’ll be able to focus on saving more for future investments.
Do your research
Before you dive into investments, take the time to research the strategies that align with your budget and financial personality. Are you risk-averse, preferring steady, low-risk growth, or are you comfortable with some fluctuations in exchange for the possibility of higher returns?
Especially in the early stages, it’s crucial to tailor your investments to fit your goals and comfort level. A financial adviser can help you identify your objectives and guide you through the different investment options that suit your needs.
Know the terms
Investing can be a complex world, with a variety of vehicles like annuities, mutual funds, stocks and bonds. There are also specific investment choices within these, such as real estate, gold and municipalities.
Understanding what you’re investing in is critical to reaching the returns you desire. Familiarize yourself with the different options and the associated risks and rewards to make more informed decisions.
Take advantage of laddering
Once your emergency fund is in place, consider using investment-rich accounts like Savings Certificates. Laddering is a strategy where you split your savings into different term lengths — such as three, six, nine and 12 months.
This approach offers two key advantages: higher interest rates compared to traditional savings accounts and more flexibility with your money. As each Savings Certificate matures, you can either reinvest the funds into new ones or adjust your strategy based on your evolving financial needs. Laddering helps you balance earning a better return while maintaining liquidity in your investments.
All aboard
With your emergency fund and additional savings in place, you might be ready to begin investing. However, be cautious: there are many fraudulent investment platforms out there. Always ensure you’re working with reputable companies.
One way to minimize risk is by investing through your financial institution’s investment group, which can offer safe and legitimate options.
Building lasting wealth
True financial security comes from making thoughtful, well-informed decisions. Start by prioritizing your emergency savings to create a buffer against unexpected expenses. From there, consider laddering your savings into higher-yield Savings Certificates, and take the time to understand your investment choices. Align your investments with your financial goals and risk tolerance, and if needed, seek professional guidance.
As you embark on your investment journey, remain vigilant and only work with trusted financial institutions to protect your wealth. By following these steps, you’ll be on your way to building long-term financial stability and lasting wealth.
By Rachel Caballero | TruWest Credit Union
