How Everyday Workers Are Building Six-Figure Investment Accounts Without High Salaries
You don’t have to be rich to have a healthy investment account. Plenty of average workers with a modest salary have saved their way to a six-figure investment account within a couple decades.
While a high salary can certainly be helpful, the manner in which the money is allocated is ultimately what matters most. Making wise money moves with what you have can literally pay off.
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If you think you don’t earn enough to ever have a six-figure investment account, you’re likely incorrect. Keep reading to learn how workers earning an average salary are building serious worth.
Start Early
To find success as an everyday investor, there’s nothing more powerful than time, said Skee Orr, certified financial planner (CFP), founder and lead advisor at Kinetic Wealth.
“A person who starts saving in their mid-twenties and earns a modest return can end up with significantly more than someone who starts in their forties and saves twice as much each month,” he said. “Starting early gives your money more time to compound, or in other words, grow on top of itself.”
Keep Living Expenses Affordable
Everyday workers with six-figure investment accounts live within their means, Orr said.
“This does not mean living without joy or fun,” he said. “It means proactively being intentional.”
Those who have mastered this know what their best life looks like and spend and save accordingly, he said.
“They find that living below their income is actually freeing, not restrictive, because it puts them in control of their decisions, instead of letting the control go to everything we can buy,” he said.
Avoid Costly Mistakes
It’s often over looked, but protecting your wealth is just as important as growing it, Orr said.
“Cashing out a retirement account early, taking on debt to keep up with someone else’s dream or chasing speculative investments can set a plan back years,” he said.
Knowing how to avoid those mistakes and having a guide to help you see them coming makes a huge difference over time, he said.
Make Investment Contributions Non-Negotiable
Prioritize investment contributions by working them into your budget and treating them like a bill, said Samantha Mockford, CFP and associate wealth advisor at Citrine Capital.
“We pay our bills whether we feel financially insecure or indulgent,” she said. “Making a budget ensures your savings plan still allows you to fund other goals, such as paying your cell phone bill, taking an annual vacation or saving up for a car.”
Automate Investment Contributions
After you’ve decided how much to contribute to your investment accounts on a monthly basis, automate this process, Mockford said.
“Some custodians also require you to buy investments with each cash contribution, so automate those purchases if possible, as well,” she said.
While you’re technically able to change your monthly contributions, Mockford noted that the most successful investors make a habit of contributing the same amount each month.
“When the markets are down, that same amount can afford more shares,” she said. “When markets are up, that same amount can afford fewer shares.”
By automating this task, investors end up buying more when securities are priced lower, she said.
Create a Diversified Portfolio
The best investors don’t put all their eggs in one basket. Instead, they design a diversified portfolio with investments across industries, company sizes – i.e., market capitalization – and geographies, Mockford said.
“Every custodian has inexpensive mutual funds and ETFs that take care of this diversification for you,” she said. “Your asset allocation should be more equities if you don't plan on using the funds for many years and more bonds if you need it soon.”
She recommended working with a fee-only financial advisor to create the best asset allocation for your unique situation.
Maintain a Solid Investment Strategy
When the markets get rough, it can be tempting to switch up your investment strategy. However, Mockford said not to sell or make changes unless your goals change.
“For example, sell some investments and move to a more conservative allocation because you plan to make a down payment in the next couple years, not because you feel anxious watching the news,” she said.
This can be tough, but the most successful investors understand the importance of battling storms.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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