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There is never a better time to start building wealth than the present.
Yet how to go about it depends on your age.
“The better job you do with creating your financial security, the more flexibility it provides you to make better choices in the future,” said certified financial planner Carolyn McClanahan, an M.D. and founder and director of financial planning at Life Planning Partners, based in Jacksonville, Florida.
Here’s a decade-by-decade guide to increasing your wealth.
The first thing to do is create an emergency fund. If your job is very secure, have a savings goal of three to six months of expenses. If it is insecure, such as a commission-based sales job, strive for six to 12 months, McClanahan advises.
If your employer has a 401(k) plan and offers a match, contribute enough to get that match.
After that, open a Roth individual retirement account, if your income qualifies, McClanahan said. In 2021, you can contribute a maximum of $6,000.
If you still have money to save after maxing out your Roth, contribute more to your 401(k). In 2021, you can put as much as $19,500 into the account.
At this age, your portfolio can have more in equities than fixed income, since you have more time to recover from any down markets.
Last, make sure you are insured appropriately, especially auto and disability insurance, since one accident or health issue could wipe out any savings you may have.
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