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Building Wealth One Step at a Time

For most people, wealth isn’t something that arrives on the doorstep one day unexpectedly. As much as some of us would hope for it, the statistics are horribly against us in this regard. Wealth is built and earned over time. Carefully. Deliberately. Strategically.

According to a Stanford University study, average American household wealth doubled between 1983 and 2010. But today, those in Gen X and Gen Y have accumulated less wealth than their parents did at that age over a quarter-century ago. Their average wealth in 2010 was 7%  below that of those in their 20s and 30s in 1983. 

If building a healthy personal fortune is appealing to you (and why wouldn’t it be?), then here are some ideas to guide you on your wealth-building journey:

Get rich quick: No such thing

Although some may think of “the wealthy” as trust-fund babies raised in privileged backgrounds, the truth is (according to U.S. Trust’s recent insight survey) that among the wealthy set, 77% originally came from middle-class or lower backgrounds, including 19% who grew up poor.

The lesson here is that for the most part these wealthy individuals acquired the bulk of their fortune not from windfalls but the old-fashioned way by working, saving, and investing over time, and in many cases, a long time.

There is no lottery ticket or get-rich-quick scheme for most of us. Slow and steady is the rule to wealth development. You may need to sacrifice a night on the town here and there or extravagant spending as you get there, but remember that some of the richest people in the world have accumulated wealth in this way.

Sensible investments

A middle ground, sensible approach is most certainly your best bet. Fancy investments that boast huge returns in a short time should be considered with a very healthy dose of skepticism. To their credit, the overwhelming majority of the rich don't buy this. Just 14% said they made the bulk of their investment gains by timing the market; the other 86% credited their success to good old buy-and-hold investing, or investing in a diversified mix of stocks and bonds and participating in the long-term upward sweep of the market as opposed to the vain exercise of trying to predict its movements. 

One person’s idea of wealth may vary wildly from the next person’s. Without a clearly stated end-goal, how is it possible to keep on track and make it there? It’s highly unlikely. Whether it's retirement, buying your dream home, or whatever your personal goals are, always consider the consequences of your financial decisions, and how they contribute to the big picture and the prize at the end of the wealth-building road.

If you're going to become wealthy, you need to monitor all parts of your wealth. Be frugal, but not foolish. Don’t spend an inordinate amount of time trying to save a penny when you could be focusing your energy on earning a dollar somewhere else. Your wisest way to build wealth initially could be investing those hours in understanding and increasing your own financial literacy.

 

IMPORTANT DISCLOSURES

Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.

Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC.

 

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