Though we’re often amazed by stories of people who create vast fortunes seemingly overnight, the reality of wealth-building is often quite mundane. Contrary to what pop culture often depicts, coming into money through luck is far less likely than earning it through hard work and persistence. Though luck can certainly play a part, creating a sizable nest egg is almost always a gradual, long-term process that requires planning, discipline, and a lot of patience.
As challenging as that all sounds, that does mean that building wealth is possible for almost everyone. Through small, consistent actions, you can eventually set yourself on a path to real financial security. Let’s look at the steps you need to be taking to build up wealth, not just for retirement but to help you achieve whatever it is you desire.
Start Now
The most crucial step in building wealth is to begin immediately. Setting aside a portion of your paycheck or allowance in a high interest savings account today will let you take advantage of compound interest and simplify your journey to financial security later on. Though any savings account is better than none at all, you should prioritize consumer banking products that offer high interest rates. In the Philippines, Maya Savings has emerged as a top pick, thanks to its high annual interest rate of 15% per year.
Define Your Short-Term and Long-Term Goals
Having clear goals lets you narrow down your choices to the most essential. For instance, if you consciously set a vacation as a short-term goal, the choice to forgo some luxuries so that you can travel sooner becomes much easier. Similarly, if you set a longer-term goal like buying a home, it becomes a simpler choice to put more of your money into investments rather than a new car or more frequent trips abroad.
Create a Budget
Using your predefined goals, create a budget to keep yourself accountable and ensure that you’re living within your means. Track your overall income and expenses, down to the smallest sources, and allocate appropriate funds to different categories. Essentials like savings, housing, utilities, food, and entertainment can be prioritized accordingly to meet your goals and maximize your financial breathing room.
Set Up Automatic Deposits to Your Savings
Automating transfers from your payroll or checking account to your savings fund effectively frees you of the conscious effort and decision to save. This will make things more streamlined and much easier, especially because there will be times that you’ll be tempted to spend whatever cash you have available for things that aren’t in your goals. With automated deposits, you’ll find that your savings will grow faster than you ever expected.
Build an Emergency Fund
Once your finances become reasonably sustainable, consider opening another savings account just for your emergency funds. To start, aim to save at least three to six months’ worth of living expenses. This should ensure that you’re protected from unexpected income losses as well as necessary out-of-pocket expenses like medical bills.
Avoid Taking on Excessive Debt
Debts are sometimes necessary but you should always remember that they come with serious tradeoffs. Focus on paying off high-interest debts like credit cards and personal loans as quickly as possible. If you’re already in debt, consider renegotiating your payments and using strategies like the snowball or avalanche methods so that you can start saving sooner.
Invest in Your Retirement
Though you may not want to solely rely on them for your retirement, contributing to your government-mandated funds or other forms of pension can help reinforce your long-term wealth building. Whenever your income increases, consider maximizing your contributions to benefit from tax advantages and compound growth.
Diversify Your Investments
Once you’ve achieved a relatively comfortable financial position, begin investing in relatively safe asset classes like stocks, bonds, and real estate, alongside your savings. This strategy can protect your wealth from market volatility and also increases the potential for higher returns over time.
Prioritize Self-Development
Investing in your own education and skill development can boost your earning potential, allowing you to build your wealth faster. If nothing else, it will also make the entire experience of building wealth worthwhile by opening new opportunities for you to explore.
Be Intentional with Your Spending
Above everything else shared so far, you must make it a habit to be more conscious about how you spend your money. Prioritize spending on things that truly matter and bring value to your life instead of focusing on fleeting enjoyment, even if the costs seem inconsequential at that moment. Consistency counts both ways and those small expenses will always add up, slowing down your journey to prosperity.
Regularly Review and Adjust Your Financial Plan
Life circumstances can change over time, so it’s important to review and adjust your financial plan regularly. Assess your progress, update your goals, and make necessary changes to stay on track.
Manage Your Financial Challenges Consistently and Efficiently
Most of the key steps to building wealth are accessible to working Filipinos. However, the specific obstacles may differ depending on one’s situation. To grow your wealth more efficiently, consider consulting with a qualified financial advisor. These professionals should be able to offer you advice that’s tailored to your goals and financial situation.
In any case, wealth building is a marathon, not a sprint. Keep your eyes set on your goals, stay consistent, and the rest should follow.
