Building Wealth a Little at a Time

Building wealth isn’t about how much you earn or even how much you can afford to save. Building wealth is a process embodying one basic principle: developing long-term investment habits.

Investing doesn’t diminish the importance of saving, after all, you can’t invest money if you haven’t saved it first!

Get started by opening a dedicated bank account and commit to putting aside a set amount each pay.

Most banks offer savings accounts where, provided you make regular deposits and no withdrawals, they’ll throw in features like reduced fees or bonus interest.

They are a terrific vehicle for kick-starting your savings, but even with bonus interest, their earning power is limited, so unless cash accounts form part of your overall financial plan, they’re not recommended as a viable wealth-building tool.

Once you’ve accrued some savings, look for opportunities to invest your money where it can begin working towards real wealth creation.

Growth investments, like units in managed funds, tend to offer greater wealth-building potential over a longer term.

On the downside, new investors are often discouraged by the volatility of these units as their value rises and falls with market fluctuations.

So, what if there was a way to invest while minimising this risk? There is!

Dollar Cost Averaging (DCA) is a strategy where you invest fixed regular amounts. When prices are high, your deposit buys fewer units. When prices fall, it buys more. When making regular contributions, the price you pay varies, which means that over time, it averages out.

It’s important, however, that you consider your options carefully.

Many people choose managed funds because they offer small investors access to a wide range of quality investments, administered by experienced fund managers.

Regularly investing combines this professional management with the benefits of DCA. The hard work is done for you.

The right investment will depend on what will best suit you, and this is where you need to speak with your financial advisor. If you don’t have one, ask a trusted friend for a referral to theirs or use a reputable advisor directory to find one.

A financial advisor will work with you to identify investments most appropriate for your needs, circumstances and risk tolerance, that is, what you can comfortably sleep with. They will also help you navigate the fine print around fees, opening deposit, monthly amount, fund structure, risk, withdrawal arrangements, and everything in between.

You’ll be able to set up regular deductions from your bank so you don’t even have to think about it. Better still, chat with your payroll department; some organisations will facilitate post-tax deposits directly from your salary on your behalf.

Building wealth is a long-term strategy, regardless of where you’re at in life.

Wealth creation doesn’t sit alongside your financial journey – it’s the road your journey is on.

Speak to a professional financial advisor today and take the first step.

The information provided in this article is general in nature only and does not constitute personal financial advice.