7 Mistakes To Avoid If You’re Trying To Build Long-Term Wealth
7 Mistakes To Avoid If You’re Trying To Build Long-Term Wealth
Casey Bond Tue, January 25, 2022,
If you want to stop living paycheck-to-paycheck, retire comfortably or have a legacy to pass on to your children, there’s no get-rich-quick scheme that can guarantee you reach your goal. Instead, building long-term wealth takes a lot of patience and planning, and it’s important to know these common mistakes to avoid.
1. Not Having an Emergency Fund
When focusing on building long-term wealth, it’s easy to neglect cash reserves, said Nick Vail, a CFP with Integrity Wealth Advisors. However, failing to build an emergency fund can hurt you in the long run.
“It’s like going out and investing in expensive windows and kitchen upgrades while you have cracks in your home’s foundation,” Vail said. “Without proper cash reserves, you’re likely to tap into the wealth you’re trying to build when you’re in a pinch, slowing down your progress.” So before you get too far along in your investing plan, be sure to get your basics taken care of first.
2. Ignoring the Power of Compound Interest
Saving money is great, but to really grow your wealth over time, it’s necessary to invest. In fact, money invested wisely will generally double every seven to 10 years thanks to compound returns, according to Scott Alan Turner, a CFP and consumer advocate.
“The problem is at the beginning, it’s pitifully slow,” he said. That’s because it takes just as long for $50 to double to $100 as it does $500,000 to $1,000,000. But Turner noted, you can’t get to $1,000,000 without first saving $50. “Patience grows wealth.”
3. Waiting Until You Make More Money To Start
It can be hard to set aside money for far-off goals such as retirement. Plus, many people inflate their lifestyle as their income grows. So it can be tempting to keep putting off investing until you have an even higher salary. “Bigger apartments, nicer cars, eating out at better restaurants — people never seem to make enough because they consistently blow it year after year,” Turner said.
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