With the right strategy, you can achieve financial security.
- Being financially comfortable means different things to different people.
- Here are some steps you can take to increase your wealth and buy yourself more freedom.
When you think of being financially comfortable, what comes to mind? Does it mean having enough money to pay your bills without worry? Does it mean being able to stop working and live off your savings?
There is no single definition of what financially comfortable means. And there is no single financial figure to help you get to that point.
But in Schwab’s most recent Modern Wealth Survey, Americans said it takes an average net worth of $774,000 to feel financially comfortable. That’s up from $624,000 in 2021, but interestingly, it’s down from $934,000 in 2020.
In the meantime, no matter how much money you think you’ll need to get comfortable financially, there are some universal steps you can take to achieve that goal. Here are a few to focus on.
1. Get in the habit of budgeting
Following a budget is a great way to increase wealth. That’s because budgeting will help you control your spending and find ways to make sure you’re saving money month after month. If you’re new to budgeting, there are different apps you can play around with that can make the process easier. Or you can go old school and use a spreadsheet, or even a pen and paper, to chart your monthly expenses.
2. Live below your means
If you want to get richer over time, you’ll need to not spend at least a portion of your earnings. Budgeting will help in that regard, but so will setting priorities early in life. For example, you may need to commit to a less expensive car or house if you want to be able to consistently save money. Or, you may decide that having a bigger home is important to you and therefore you will spend less on vacations.
There is no right or wrong answer. The key is to decide where your money is best spent, so you don’t end up spending it all.
3. Get in the habit of investing
Investing money you don’t need right away is a great way to build wealth over the years. And you have options in that regard.
If you’re looking to invest specifically to fund your retirement, then an IRA is worth opening. Or, you can invest in your company’s 401(k) plan.
If you want more flexibility with your money, you can open a regular brokerage account. You won’t get the same tax benefits as an IRA or 401(k), but you’ll have the freedom to withdraw money from your account whenever you want. With IRAs and 401(k)s, there are penalties you could face if you withdraw funds before you turn 59½.
go after your goals
You may decide that a net worth of $1 million is needed to feel comfortable financially. Or, you may decide that all you need is enough money in the bank to cover a year’s bills. Feel free to choose your own definition, as long as you take steps to work toward your goals and achieve the financial freedom and peace of mind you deserve.
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