How comfortable your financial future looks may depend partly on where you live. For example, to be considered wealthy in San Francisco one would need to have a net worth of $5.1 million dollars, whereas in Atlanta, the tag applies at a net worth of $2.5 million.1
When you couple your financial picture with average life expectancy (80.59 years in the United States2), you may wonder what you can do to shore up your long-term financial picture. Here are five tips to help:
- Save first. Don’t put off saving because it’s not yet convenient. Those who start early have time to let money grow. Time can often be more valuable than rate of return. Savings of just $438 per month starting at age 25, with a return of 6.5%, will grow to $1 million by the time you are 65. If you wait until age 40 to begin saving, your monthly investment would need to increase to $1,355 to reach the same $1 million. Delaying a savings routine can be a costly mistake.
- Invest in your company’s 401(k) now. Its automatic deduction is easy and painless. Don’t wait.
- Take advantage of your employer’s 401(k) match. Take it all! If your employer offers to match up to a certain percentage of your contribution, DO IT! It’s free money that may help build your savings, and you can’t get it retroactively after you realize you waited too long.
- Live below your financial means. Just because you can buy that expensive car doesn’t mean you should. Don’t sacrifice your ability to save. Wealth creation doesn’t care what poor excuse you have to offer. It just hurts you later in life when savings really matter.
- Invest in the stock market and be patient. The average millionaire neither avoids investment risk nor depends on the overnight bonanza. Talk to a professional and decide what strategies might be right for you. Stashing money into your mattress may sound safe, but it is not a strategy of the rich and famous.