Follow these 3 banking strategies
Everyone is better off with more money in their pockets, but sometimes the road to that goal isn’t always clear. In this case, one size does not fit all. Good wealth management practices are those that are suited to a given person’s needs and means. Each of the three banking strategies described below has strengths and weaknesses that make it ideal for certain demographics. Finding one that works for you can be an excellent step toward better wealth management over your lifetime.
Set Up An Automatic Savings Account
This method is incredibly easy and requires almost no effort on the part of the saver--just open the account, set the auto deposit amount, and leave your money to accumulate on its own. Even a slight amount will add up significantly over time, making it a good way for even low-income earners to build assets.
This method is extremely safe and accessible, but it isn’t optimal in terms of financial growth. A savings account will yield some interest, yes, but not nearly as much as investing an equivalent amount could produce. In some cases, your money may even lose value over time due to interest rates that fail to beat inflation. The number one rule of wealth management is that you should always get your money to make more money for you if the option is available, and this option won’t do that for you. It is, however, an extremely flexible method that doesn’t keep your funds locked down, making it ideal for people who know they may need to dip into the savings at some point in the near future.
Use Your Retirement Accounts
Virtually everyone also has the option of putting money into some kind of retirement account – anything from a 401k to a Roth IRA. These accounts have many benefits, such as tax exemptions or low fees, that make it easier to accumulate wealth than in a traditional account. Many workers in skilled or professional positions have access to an employer matching benefit as well, netting them some extra money when they make deposits (anywhere from a small percentage of the deposited sum to a complete match that doubles it). The risk level involved is usually quite low, and your wealth will build at a reasonable pace over time.
This method of wealth-building is very efficient and reliable, but it comes with some restrictions that the other options don’t have. You won’t be able to use any of this money until age 59 ½ without paying some hefty fees, which makes it completely unworkable as a wealth-building solution for people who are aiming for goals like partial financial independence. For those who are mainly aiming for a comfortable retirement, though, it’s probably one of the best wealth management strategies out there.
Borrow To Invest
This option is risky, but if you do it right, the payoff could be enormous. Borrowing money just to invest sounds counterintuitive at first—how can you use money you don’t actually have in order to make more? Believe it or not, it can pay off spectacularly if you do it right. Whether you’re buying stocks, a rental property, or some other investment, you stand a good chance to make enough to pay off the loan and pocket some profit for yourself. You shouldn’t necessarily deny yourself these opportunities for enrichment just because you don’t have the money up front; part of wealth management is knowing when to take a chance.
Nevertheless, despite its potential, this strategy is still very risky. Accumulating debt is never a good idea if you can avoid it, and your venture might not go exactly as you planned, leaving you without the means to repay what you owe. If you’re going to go this route, you should be in a very stable financial situation that will allow you to easily recover from any damage done. Otherwise, the potential benefits simply do not outweigh the burden you’d be taking on.
While there’s no wrong way to save money, some ways are undeniably more effective than others in specific contexts. The sooner you explore your options and put your wealth-building plans into action, the more prosperous your financial future is likely to be.