To watch the “5 Ways to Retire Rich” video go to the bottom of this post.
It’s our human nature to procrastinate—especially when the deadline for getting something done is decades away. We put things off until the last possible moment because that’s when the pressure builds and we finally force ourselves to take action.
Putting something off until the last minute can work out when you’re talking about meeting a writing deadline or accomplishing a project for your business. But it never works in the case of saving money for retirement, because building wealth is inherently a long-term process.
In other words, retiring rich is virtually impossible without upfront thought and planning. The earlier you get started, the more time your investments have to grow. The key to building wealth for the future is to slowly but surely increase your net worth.
Here are 5 ways you can get started building your wealth for retirement in 2012:
Strategy #1: Spend Discretionary Income Wisely
The first strategy to retire rich is to spend your discretionary income wisely. Many people have great jobs and plenty of income but they aren’t putting any of it away for the future.
If you make a habit of spending too much on things that don’t appreciate in value, like clothes, vacations, and nights out on the town, you lose the opportunity to put your money to work for you building assets that do appreciate in value. Saving and investing—not spending—is how you retire rich.
Strategy #2: Get Rid of High Interest Debt
In order to turn your discretionary income into a fortune, use it to get rid of high interest debt. It doesn’t make sense to earn interest on an investment, while you’re simultaneously paying a higher rate of interest on debt.
So pay down expensive accounts—like credit cards, retail cards, and car loans—and keep your low-interest, tax-deductible debt, such as a home mortgage. Once you have a handle on your debt, invest a set amount on a regular schedule.
Strategy #3: Start Investing Earlier Rather Than Later
Putting time on your side can explode your wealth. Here’s an example: If you want to retire at 65 with a million dollars, you simply need to save a little over $400 a month, starting at age 25 (assuming an average annual return of 7%).
But if you wait until you’re 35 to start investing, you’ll need to invest almost $900 per month. And if you don’t get started until you’re 45, you’ll have to shell out over $2,000 per month.
Don’t let the math depress you if you’re a financial late-bloomer. Simply realize that when it comes to building wealth, procrastination is expensive! Time is a critical factor that affects your ability to build wealth.
So stop using excuses like, I don’t have enough to invest, the market is too high, or the market is too low and just get started. Always invest a minimum of 10% of your gross income for retirement.
Strategy #4: Protect Your Wealth
As you accumulate assets like cash in an emergency fund, retirement accounts, and real estate, keep it safe. Protect your personal fortune by having enough of the right kinds of insurance, such as health, life, disability, long term care, and an umbrella policy. Review your insurance needs once a year with an experienced insurance agent.
Strategy #5: Get Good Financial Advice
If you’re not sure what your financial goals should be or need help managing your money, seek the help of a financial planner. They can help you make long-term plans and show you exactly what you need to accomplish on a yearly and monthly basis to realize your dreams.
There are many ways to make quality investments that are right for your goals, interests, and expertise. Once you set the process of saving and investing in motion, it’s easy to continue because it becomes a habit.
Make a commitment to get started investing for your retirement now. You’ll look back years from now and be really glad that you did.
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