Experts: Make These 7 Money Resolutions If You Want To Become Rich on an Average Salary
Written by
Gabrielle Olya
Edited by
Sequoya Davis
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
The average American salary is now $63,795, according to the Social Security Administration. If you’re making around that amount, being “rich” may seem out of reach. But with the proper planning, you can use what you have to build wealth over the long term.
As you think ahead to the new year, consider making these expert-approved money resolutions to become wealthy while earning an average income.
1. Create and Stick to a Budget
“Establishing a comprehensive budget is the foundation,” said Taylor Kovar, CFP, CEO of Kovar Wealth Management. “It helps in understanding where your money is going and identifying areas where you can cut back.”
Once you create a budget, you can earmark a portion of your income to go toward goals that will help you build wealth.
2. Pay Off High-Interest Debts
“High-interest debts, such as credit card balances, can significantly hinder wealth accumulation,” Kovar said. “Focus on paying off these debts as quickly as possible, possibly using strategies like the debt snowball or avalanche methods.”
The debt snowball method involves paying off your lowest-balance debts first and building up to paying larger debts, while the avalanche method entails paying off your debt by interest rate, starting with your highest-rate debt.
3. Contribute as Much as You Can to Your Employer-Sponsored Retirement Plan
“Contribute to employer-sponsored retirement plans like 401(k) [plans], especially if there is a matching contribution,” Kovar said. “If possible, max out these contributions or at least contribute enough to get the full employer match.”
He also recommends opening an IRA to further boost your retirement savings.
4. Invest Early and Often
“The key to building wealth is not to simply save, but to save and invest,” said Robert R. Johnson, Ph.D., CFA, professor of finance at Creighton University’s Heider College of Business. “To build true wealth, one should invest early and consistently and take prudent risks.”
Johnson recommends investing in the stock market and allowing compound interest to grow your money over time. “Dollar-cost average into a broadly diversified stock fund and invest whether the market is up, down or sideways,” he said.
In addition to stocks, you may want to consider investing in an annuity product, such as Gainbridge’s FastBreak annuity. Annuities can offer higher APYs than certificates of deposit, and they are more flexible. For example, Gainbridge’s FastBreak™ annuity pays up to APY* (five times the national CD average) and allows you to withdraw up to 10% of your account value each year without penalty.
5. Build an Emergency Fund
It’s difficult to build wealth if you need to take on debt to cover an emergency.
“Aim to build an emergency fund that covers three to six months of living expenses,” Kovar said. “This fund can help you avoid dipping into your investments during financial emergencies.”
6. Boost Your Income
If you’re earning an average salary at your job, you may want to look into ways to create more income streams.
“Consider side hustles or part-time jobs to supplement your income,” Kovar said. “The additional income can be directed toward savings and investments.”
7. Automate Savings and Retirement Contributions
“Making retirement and savings contributions automatic is a wise approach,” Johnson said. “People should try and automate as many financial decisions as they can. For instance, have an amount taken out of each paycheck and put directly into an investment fund — most appropriately, a low-cost stock index fund.”
If you automate contributions at the beginning of the year, you never have to think about it again.
“The biggest advantage of automatic plans are the behavioral underpinnings of the plans,” Johnson said. “If we are enrolled in an automatic savings plan, inertia and the inherent laziness of people tend to work in our favor. That is, once enrolled in an automatic savings plan, people tend to stay enrolled.”
*Annuity rates are subject to change at any time, and the rate mentioned may no longer be current. Please visit Gainbridge.io for current rates, full product disclosures and disclaimer. Withdrawals above the 10% free withdrawal amount subject to a withdrawal charge and market-value adjustment. FastBreak™ is issued by Gainbridge Life Insurance Company in Zionsville, Indiana. FastBreak™ is not a tax-deferred annuity; instead, it is taxed annually.
More From GOBankingRates
