While it is commonly understood that the habit of saving money regularly is a fundamental step in building your wealth, this step alone is insufficient. This is because the purchasing power of your savings is eroding every year without fail due to inflation rate.
Getting solid financial footing requires you to focus on the most important elements of your money: saving and investing. But of course, that’s easier said than done.
What are the key tasks you should you focus on when improving the state of your finances? Consider these eleven rules of wealth-building:
#1: Keep At Least Three Months of Living Expenses in a Savings Account
That’s just a starting point.
If you’re self-employed, work on commission, or work in an unstable industry or position, double or even triple that baseline.
Many financial planners believe it’s a good idea to have six to nine months of your normal expenses stashed away.
#2: Multiply Your Living Costs by 25.
That’s how much you need to retire. To spend $40,000 a year in retirement, you need to have $1 million saved. Better start cracking!
#3: Save a Minimum of 10 Percent of Your Salary.
Start as young as possible, when the power of compounding returns is the greatest. An easy way is to opt into automatic withdrawals to your 401(k) if your employer provides one.
Through compounding interest (the money that your money earns), you’ll reach the $1 million mark. It might take several decades, but your future self will thank you.