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Added on the 16/01/2021 15:08:19 - Copyright : Wochit
To build wealth that can be passed down through generations, getting out of debt-- and staying out of debt--is very important. On the other hand, Business Insider personal finance contributor Jannese Torres-Rodriguez argues increasing your income is just as important. It's not always possible to find jobs that progressively pay more and more. But side hustles can serve that purpose instead. Torres-Rodriguez says her side hustles now bring in roughly $100,000 a year, and she uses it in three ways to build generational wealth. She first accelerated her own retirement savings. Then, she helped her niece with college, so she doesn't have to leave school burdened with debt. Now, it gives her enormous pleasure to be helping out her own beloved parents through their golden years!
Especially in uncertain times like these, the dream of owning one's home free and clear is an enticing one. On the other hand, isn't saving for retirement, or college funds more important? According to Business Insider, if you have the opportunity to pay off your mortgage early, the deciding factor comes down to just one thing: interest rates. If the rate on your mortgage is higher than the rate you'd earn by investing cash in the stock market, pay down the debt first. But before you do that, run the numbers to see if refinancing your mortgage would make sense. If so, you can apply the freed-up cash towards your high-interest debt. Once that's cleared up, pay off the mortgage!
Just because you've worked hard and saved for years, don't be complacent--it doesn't mean you can afford to retire. According to Business Insider, if you haven't upped your savings rate over the years, you may not have saved enough. That's because the typical 3% people put into their 401(k)s just isn't enough to cut it these days. Another red flag is that you saved cash over the years, but didn't invest it. Despite the vagaries of the stock market, investing money is better than stuffing it into a piggy bank. Finally, if you've made significant early withdrawals from your retirement plan, you're probably years away from retirement. Preparing for retirement is a matter that requires planning, strategy, and active participation. Seek out professional advice.
Ramit Sethi is the author of 'I Will Teach You To Be Rich,' and its associated courses and seminars. His material is wildly popular, and provides many techniques for building wealth. Some focus on entrepreneurship, and others focus on investment. One reader, Sunny Shah, built his own savings and investment portfolio by using just two techniques Sethi suggests. According to Business Insider, he first used the pay-yourself-first strategy to prioritize saving. Shah scheduled his deposits to his savings and investment accounts even before payments for household bills or discretionary spending. And he used a dollar-cost averaging strategy to save for retirement and other long-term goals, investing the same amount each month automatically. Now just 25 years old, Shah's savings and investment portfolio has surpassed the $100,000 mark!
Business Insider contributor Kevin Panitch has a high-deductible health plan, and uses a health savings account, or HSA, to pay for medical costs. However, he was unaware for some time that the humble HSA is actually a hat trick of tax advantages. That's because the IRS allows the money in HSAs to be invested, and it grows tax-free. You can make tax-free contributions, and you can also make tax-free withdrawals to cover qualified medical expenses. If you use the funds after age 65 for non-medical expenses, you just pay normal taxes on the money. The account essentially becomes a second 401(k). Panitch wasn't alone in thinking that he could only 'save' the money in his HSA. In fact, only about 4% of people with these accounts invest the money!
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