How to Build Wealth – Stash your Cash
Okay, so you’ve learned the basics of getting your financial house (budget) in order – how much you want to spend each month on toys versus how much cash you want to stash, yes? Good. If not, START HERE, we’ll use the same terms so it helps if you know them and on Day 3 you’ll see a handy chart with how to divide the goodies.
Necessities: these will be paid for out of your “regular” checking account. You should be able to access this account online and pay bills online – without fee. If you are paying for a checking account or bill pay, you should seriously question your financial institution choice. Your salary should be directly deposited into this account. This is the clearinghouse account. How to Build Wealth? Pay your bills ON TIME, EVERY TIME!
Longest Term Savings: Since this is likely a retirement account/portfolio it should be with the financial institution holding your 401k, SEP or other retirement account choice. If you choose to split your Longest Term Savings into multiple accounts, keep your records very clear and simplify when possible. For example, JP Morgan holds your company 401k but you only want to contribute 6% to that account so you keep the other 4% (of your 10% LTS) in a Vanguard mutual fund. That’s fine. Beware the tendency to use this account for stock market speculation…. This is NOT the account for that. Your account choice has tax implications. Consider carefully. How to Build Wealth? Save for the long haul.
Remember this is foundation of your “how to build wealth” plan, but NOT the dynamic builder of your wealth…. Don’t be greedy, historically the market returns 11% for long term investors – that is fine for this account. This account is part safety blanket and part wealth indicator.