3 Simple Ways to Quietly Save Money and Build Wealth
Saving enough money to reach your goals like owning a home and retiring comfortably doesn’t need to be complicated or flashy. Many people who build their wealth do so by staying consistent and sticking to simple, low-profile strategies.
Here are three ways to quietly save money and build your wealth over the long term.
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1. Avoid fees
Fees can eat away at your savings, and they’re often easy to avoid. Having a cash buffer in your bank balance can help you avoid overdraft and maintenance fees in your checking and savings accounts, and having cash on hand so you can avoid using out-of-network ATMs can help you reduce ATM fees.
Successful investors also invest in funds with low expense ratios, such as low-cost index funds that track the S&P 500. The lower the expense ratio, the more of the profit you get to pocket.
Money saved is money earned, and it also results in more principal that gets to compound over time.
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2. Automate your savings and investments
Another way to save money over time is to implement and set-it-and-forget-it approach. Enter automatic transfers, which banks and brokerages offer to let you set a certain amount of money to automatically move to your savings and investment accounts.
For investors, this allows for dollar-cost averaging — a strategy that entails investing a set amount of money into the financial markets at regular intervals. The approach lets you ignore market noise that could tempt you to pull your cash on to the sidelines and miss out on market returns. If you have a 401(k) or similar retirement savings account, you likely already have automatic transfers set up. Consider doing the same with your other savings and investment accounts.
3. Stick to the basics when investing
Many people who grow their investment portfolio enough to reach their goals do so by relying on balanced index funds instead of trying to pick individual stocks that beat the market. While picking the stocks that outperform the rest of the market will result in higher returns, it’s extremely difficult to do, even for professionals.
Dollar-cost averaging into well-diversified funds is a time-tested strategy, and it will take a lot less time and effort than consistently buying and selling stocks in an effort to replicate what experts on Wall Street are doing. Diversification refers to investing in a mix of assets like stocks, bonds and cash, as well as assets of different sizes and types. For instance, a portfolio could include funds that offer exposure to small-, mid- and large-cap U.S. stocks in several industries — such as technology, health care and industrials — as well as funds with international stocks, and funds with bonds. Some investments will hold steady or perform well when others suffer, which will help your portfolio weather storms in the market.
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