How to Get Rich (the Right Way)
There are myriad self-proclaimed financial experts and authors who can share their "secrets" to becoming rich with a single investment strategy or income hack.
But don't feel like you have to attend any pricey seminars or know magic formulas to build wealth. The trick to growing your net worth is often about sticking to regimented and smart spending, investing and saving decisions. "The slow way is usually how it goes," says Dennis Nolte, certified financial planner and vice president at Seacoast Investment Services in Winter Park, Florida. "Everybody wants to get rich quick, but for most of us, it's a marathon."
Building wealth is all about saving your money, investing your money and staying invested, says Michelle Begina, senior partner and managing director at Snowden Lane Partners. "Slow and steady wins the race."
Want to get rich? Here's how to do it the right way.
[See: 50 Ways to Improve Your Finances in 2019.]
Rein in Your Spending
Begina likes to reference "The Millionaire Next Door," the classic book by Thomas J. Stanley and William Danko, about the invisible rich who invest, save and spend wisely.
Sticking to a plan and spending less than you earn is a crucial habit for building wealth, Begina says. "We have complete control over where we choose to spend our money and how much we choose to spend," she says.
Take a moment to audit your spending by reviewing credit card and bank statements or any budgeting apps you use. Determine whether there are variable expenses on which you can cut back, such as coffee runs, expensive vacations or clothing. Audit your regular fixed expenses, such as housing, transportation and utility bills. Perhaps it's time to shop for a new insurance provider or even downsize your house.
Finding places where you can stretch your budget can help you redirect more cash toward saving, investing, meeting financial goals and building a financial security net.
Plus, forgoing a pricey upgrade -- for example, by staying in a midsize house or driving your old car for an extra few years -- can help tamp down on spending. It helps not to let your lifestyle inflate when your earnings do since the house and neighborhood you live in can impact your spending habits, Begina says.
[See: 10 Tips for Couples and Young Families to Build Wealth.]
Know Your Employee Benefits
Another way to grow your wealth is to take advantage of your employee benefits. "Understanding your company or employee benefits is huge," Begina says.
If you have a retirement account with a company match, make sure to contribute enough to secure that match. Understand the insurance options offered to you and reevaluate your health insurance during every open enrollment season. If you have questions about how to handle employee stock options or another unfamiliar benefit, discuss strategies with an expert who can help ensure you're not leaving money on the table.
Invest Wisely
During market downturns, it's tempting to panic and rework your financial plan. But building wealth is about sticking to your investing plan, even when the market resembles a roller coaster. If you're tempted to rejigger your investment strategy during market volatility, Begina recommends taking the time to think about any financial decision carefully first. "Literally sleep on it, give yourself some kind of distance from it because our natural reaction is to act," she says.
And speaking of investing, don't neglect to invest in yourself. Unless you're lucky enough to have an inheritance or sizable trust fund, you'll need to continue to protect your ability to earn an income and remain employable.
That means investing in yourself when it comes to staying competitive in the job market. "Invest in yourself and get that extra degree if it's practical," Nolte says. Negotiate salary and make connections in your chosen field to increase your competitiveness. Earning more will help you reach your wealth-building goals faster and divert more to savings.
Additionally, don't forget to protect your earning potential with disability insurance in case you lose the ability to work.
[Read: Best Budget Apps.]
Be Thoughtful About Debt
Getting rich isn't about avoiding debt entirely. But those who are building wealth should be thoughtful about the debt they accumulate and their ability to repay it. Smart borrowers differentiate between high-interest consumer debt, such as credit card debt, and debt that may pay off down the road, such as mortgage debt or student loan debt (when taken out strategically).
"Staying as debt-free as possible is a huge key in creating wealth, so it's being really wise about the debt you take on and actually paying cash for things," Begina says.
Find a Support System
Seeking to get rich on your own is a lonely activity. Find a support system, be it your spouse, financial advisor or friends, who cheer on your frugal spending habits and prop up your good money management. If you're working at odds with a family member or financial planner, building wealth will be that much more difficult.
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