Rules for Wealth Building and Amassing Money

Mother teaching daughter about saving and counting coins on a glass tabletop.

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You don't need to earn a large, six-figure salary to accumulate a good-sized nest egg and build wealth. To ensure a solid financial future, plan ahead and form your spending and savings strategy for each phase of your life. Whether you're a recent college graduate, a mid-life parent getting your kids ready for college, or a senior citizen looking forward to retirement amassing your nest egg now, will help give you comfort later.

Choose a Spouse with Compatible Financial Goals

Finding and sticking with the right life partner, especially in the financial sense, can make or break your chances of becoming wealthy. In fact, according to the research of author and academic Dr. Thomas J. Stanley, self-made millionaires are far more likely than the general population to be and stay married to the same spouse for life.

It matters that you and your life partner both work towards the same financial agenda. If you seek early retirement, they help bring in extra income or clip coupons to save more money and take advantage of interest compounding. If your priorities involve a debt-free lifestyle, they support this without secretly shopping behind your back.

Even "Good Debt" Isn't Really Good

With a few exceptions, debt can serve as a form of bondage to enslave the borrower, often for years. Visualize your life with the freedom of not owing money on anything. Resist the urge to "keep up with the Joneses" and charge up credit cards for things like expensive clothes and lavish vacations. Make paying off your existing debt a priority.

Some financial advisors say that borrowing to finance important items such as a home or education is "good debt," but people tend to choose much more expensive schools and houses when they pay for them with borrowed funds.

This overreaching can keep you in debt for years, and cost you thousands of dollars in interest that could've funded your retirement goals. Many high-quality, yet bargain-priced schools exist, and buying a home beneath your means allows for extra cash to pay off your mortgage early and load that money into savings and retirement investments.

Get Clear on Your Relationship with Money

This rule is less obvious, but If you don't like where your parents were financially at your age, make different, conscious choices for yourself and your family. During your upbringing, the way in which your parents managed their money has likely influenced your financial management today.

Money is nothing more than a piece of paper with the image of a famous person on it. But, when you understand what it represents to you, you gain insight into your spending, saving, and earning habits. If you have always felt that you don't deserve to earn a higher salary, live without debt, or have as much money as "other people," these beliefs can cause you to make poor financial choices that will hold you back.

Get in touch with your true thoughts and break through them so you can start building more wealth.

Take Advantage of Retirement Plans

Max out your contributions to retirement accounts each year. Especially if you are young, you have the distinct advantage of time, meaning additional years of compounding interest growth. If you have a 401(k) plan through your employer—especially if they match your contributions—pay into it to take advantage of that match.

You could also, on top of that, fund a Roth IRA with annual contributions. Avoid a common mistake: Do not borrow money out of your retirement accounts. You won't be able to contribute more funds until you pay back the loan. You might find it harder to make contributions in future years, plus you'll have missed out on accumulating interest on the borrowed funds. Find alternate ways to cover unexpected medical bills, college expenses, or improvements to your home.

Live Below Your Means and Increase Your Living Standard Slow

Get comfortable saying "no" to items you cannot afford to pay for with cash. Overspending and getting into debt dramatically impact the funds you'll have available each month to fund your retirement.

Buy a home that costs no more than 25% of your monthly net pay, and get a 15-year mortgage at a fixed rate. As you earn more, start making additional payments on your mortgage so that you can pay it off sooner and contribute that money to retirement savings. This way, you'll set yourself up for a well-funded retirement with no mortgage payments.

Fund Your Retirement Before the Kids' College Funds

This may not sit well with a lot of parents, but there's no guarantee your kids will want to attend college. However, there's a high degree of probability that you will retire, assuming you live long enough. If you can't afford to do both, prioritize retirement savings over saving for college.

Draw Social Security as Late as Possible

Instead of retiring and taking social security payments as soon as possible, at 62, delay your social security claim. As of February 2018, if you were born before 1955 and wait until the full retirement age of 66, you'll receive 100% of your social security benefit.

If you delay retirement until age 70, you'll receive a bonus, which puts your benefit at 132% of the amount you'd receive each month if you had retired at 66. Don't wait on applying for Medicare though; you'll need to apply by age 65 to avoid possible increased costs.

The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.