There are many ways to build wealth, from founding a successful startup to receiving a handsome inheritance.

However, for the everyday consumer, getting rich usually requires a longer-term strategy. This can include a number of components such as: B. Budgeting, investing and managing your money well.

According to a recent survey by financial services firm Empower, the number one factor in building wealth is salary, according to 67% of Millennials and Gen Z. The younger generations favored salary over other wealth-building factors such as being out of debt, job stability and living in your own means.

While a high salary can play an important role in growing your wealth, it alone will not make you rich. Here’s what you need to start building your net worth.

How to actually build wealth

Your salary alone says little about your overall wealth. A high salary can indicate a better financial position, but if you don’t use that money effectively, it may not add much to your net worth.

“Actually, the real key to wealth accumulation is how much of that check you keep,” Scot Johnson, chartered financial analyst and chief investment officer at Adell, Harriman and Carpenter Inc., told CNBC Make It.

You can put some of that in a savings account — you should always have cash in reserve for emergencies — but investing in assets like stocks, bonds, or real estate will help your money grow over the long term.

If the money you save is just under your mattress, your purchasing power could shrink over time due to inflation. But investing in low-cost index funds is a proven, homegrown and millionaire-approved way to build wealth on virtually any income.

Index funds are a practical investment option because they’re often low-cost and give you exposure to a variety of stocks, providing automatic diversification. That way, your portfolio isn’t tied to the success of a few specific companies and can better weather market volatility.

Even if you can’t afford to put a lot away, it’s a good idea to make a habit of investing as much as you can. Unlike money sitting in your checking account, investing benefits from the power of compound interest, which occurs when interest accumulates on your earnings and your initial investment, allowing your money to grow faster.

“Building wealth is about balancing life in the here and now and setting aside enough savings to grow for yourself,” Johnson says. “The longer that savings grows for you, the bigger the stack gets.”

DON’T MISS: Do you want to be smarter and more successful with your money, your work and your life? Sign up for our new newsletter!

Get CNBC’s for free Warren Buffett’s Guide to Investingwhich brings together the billionaire’s best advice for regular investors, rules of conduct and three key investing principles into one clear and simple guide.

Source :

Leave a Reply

Your email address will not be published. Required fields are marked *