Accumulating wealth is an almost universal goal. After all, most Americans want to retire at some point, which requires a significant amount of savings. Growing a sizable nest egg is desirable for other reasons, too: Perhaps you dream of taking a trip around the world, taking a more satisfying, yet lower paying, job or starting your own business. All those objectives can be supported with a hefty pile of cash.
Stockpiling reserves isn’t easy, though, and getting started is often half the battle. That’s why we turned to a handful of experienced financial experts to share their strategies for developing a personal wealth plan. They pointed out that it often all starts with shifting your attitude.
After Julie Ann Cairns, an economist and author of “The Abundance Code: How to Bust the 7 Money Myths for a Rich Life Now,” came close to bankruptcy in 2008, she realized she was recreating the same patterns of building wealth and then losing it that she had experienced in her childhood. “I came from a prosperous family, and then when I was 11, my parents broke up and they lost all their money,” she says. In order to not repeat her parents’ money mistakes, she had to confront the money beliefs she had absorbed and create new ones.
“The hardest part is identifying the beliefs that are holding you back,” she says. One common belief, and one that Cairns held herself, is that money makes people miserable. She replaced that belief with a more positive one — that money supports and facilitates happiness. That made it easier for her to take actions that led to lasting wealth.
In addition to confronting harmful belief systems, financial experts recommend taking time to map out your route to savings. “Especially with retirement, it’s all in the planning. Run a retirement estimate so you can see where you are now and if you’re on track or not,” recommends Liz Davidson, founder and CEO of Financial Finesse, a financial education company.
A retirement preparedness study released today by Financial Finesse based on the financial wellness assessments of 12,715 people found that 61 percent of respondents didn’t even know if they were on track or not for retirement savings. “How can you get to where you want to go if you don’t even know where you’re at now?” Davidson asks.
Taking the relatively simple step of crunching some numbers with an online calculator to show just how much you will have saved for retirement if you increase your savings by 1 or 2 percent a year can serve as a powerful motivator, Davidson says. “It’s very empowering and inspiring,” she says, adding that knowledge allows people to make better decisions about their savings rate.
Once you decide to start putting more money into savings, Davidson suggests finding ways to make it fun in order to increase the chances of sticking with it. For some people, that might mean embracing couponing at the grocery store or perhaps completing financial wellness assessments to get feedback on how they’re moving closer to savings goals.
Gary Plessl, a financial planner and co-author of “The Book on Retirement,” says one way to figure out what costs you can cut now is to write down every bill and ask yourself what you can live without. “[I]’ve met people who make $60,000 with millions saved and others who earn hundreds of thousands of dollars a year with nothing saved. It’s about your life choices: what type of car you drive, the type of house, the type of vacation people choose,” he says.
Kevin Houser, also a certified financial planner and co-author of the book with Plessl, says looking at the worst-case scenario is also a useful exercise. “What if the market drops two years in a row in the first two years of my retirement?” he asks. He suggests managing your accumulated wealth in such a way that you don’t have to change your spending based on the stock market’s behavior. That means investing money in a diverse portfolio so it’s protected from stock market turbulence.
Similarly, Emily Guy Birken, author of “Choose Your Retirement: Find the Right Path to Your New Adventure,” suggests taking advantage of retirement accounts available to you. “If you haven’t done anything yet, go right to your HR office, and start putting money aside into your 401(k),” she says. Your employer might offer a match on some of the funds you set aside, which will automatically increase your savings rate.
“Even if you can just afford to save 1 percent of your salary, or $10 a week, do it,” Birken says. Then, you can gradually raise the amount over time. If you don’t have access to a 401(k), consider an IRA instead.
Birken adds that it’s important to leave room for splurges, too, to prevent burnout. “You might say, ‘From now on, I’ll brew my coffee at home and won’t spend on anything frivolous,’ but that breaks down within a week, because we’re human beings, not robots,” she points out. That’s why your new savings regime has to incorporate some room for your spending weaknesses, whatever they may be.
At the same time, Birken encourages people to find enjoyable ways to spend time that are not expensive. “Find little things that make you feel good, like taking a bath, taking a nap or going on a long bike ride,” she says. You can also use those activities to celebrate whenever you bump up your savings reach or hit a savings target.
Finding a support group can also help you stay on track. “Getting a group of people who are there to motivate each other helps immensely,” Birken says. That way, if you have a friend who is also attempting to build her wealth, you can call her when you feel tempted to spend money on something that would derail your savings plans.
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How to Create Your Personal Wealth Plan originally appeared on usnews.com