Building wealth at any age can seem daunting, especially if you’re not sure where to start. Different stages of life require unique approaches and the development of new understandings, and the same applies to financial planning.
Whether you’re just starting out in your 20s or starting over in your 40s to prepare for your 60s, building wealth is all about having the right saving and investing tips to build a solid foundation that will take your money further. No matter your age, JPMorgan Chase financial resources are great resources to take advantage of when it comes to understanding how Black families build wealth.
Your 20s
Your 20s can be an incredibly tumultuous decade. You’re on your own for the first time, and the possibilities are endless — and overwhelming! Still, whether or not you decide to pursue a higher education, there are plenty of things you can do when it comes to understanding how to build wealth in your 20s.
Start an Emergency Fund
Creating an emergency fund is a great way to establish a solid financial foundation. Your emergency fund should be anywhere from three to six months’ worth of living expenses. Start by saving $1,000, then build from there.
Store this money in a savings account and use it only for unforeseen events, such as an illness, sudden unemployment, a vehicle accident or repair, or any other family emergency that may arise.
Build Your Credit Score
Having a strong credit score will help you when it comes to getting housing or borrowing a loan for a new business, and there are plenty of ways you can build good credit, such as:
- Paying your bills on time
- Applying for secured credit cards or secured small-dollar loans (i.e. those with a credit limit of $1,000 or less)
- Understanding how much debt you owe, if any (and making timely payments)
- Not applying for multiple lines of credit
- Knowing how long your credit history is & what credit accounts you have
If you’re not sure what your credit score is, you can request your free annual score here. (Please note you can only request your credit score every 12 months.)
Open an IRA or 401(k)
It’s never too early to start saving for retirement, and understanding your options is the first step toward that goal. If your job offers health and retirement benefits, such as a 401(k), you should learn more about their offerings and how much they match. If a 401(k) plan is not available to you, consider opening an IRA account.
Some employers may also offer IRA contributions versus a 401(k), however, IRAs are an excellent option for those who may want a little more flexibility with their retirement funds.
Your 30s
In your 30s, you’re likely to have found your footing more. You may have switched careers to earn more, or perhaps have a clearer focus on what your long-term goals are. Here are some key things you can do when it comes to wealth building in your 30s.
Assess Your Goals & Avoid Lifestyle Changes
Understanding where you want to go is an important step in building your wealth. Do you want to start a family and have children? Travel the world? Change careers to climb the corporate ladder (or to provide for loved ones)?
Regardless, if your 30s bring about different career opportunities, think hard before making those changes to your lifestyle. You should still be able to live within your means. If you can’t afford the upkeep that comes with a luxury vehicle or a larger housing unit, refrain from investing your money in things that will continually require maintenance.
Start Investing
Investing your extra income rather than making costly changes to your lifestyle is a great way to build financial stability and let your money grow over time. There are plenty of ways to invest, so be sure to align your investment strategy with your long-term goals.
Your 40s
Financial planning in your 40s can be a pivotal time when things begin to change. You might be preparing for long-term goals, such as sending a child to college or being faced with other childcare or unexpected medical costs, which makes saving for the future all the more necessary.
Meet with a Financial Advisor
If you haven’t yet, meeting with a financial advisor is an excellent way to create a wealth-building strategy to help meet your financial goals, such as:
- Paying off medical or student debt
- Creating a 529 college fund
- Increasing retirement contributions
- Investing outside of your retirement fund
- Finding adequate life or disability insurance coverage
- Assisting in creating an estate plan for any dependents (wills, trusts, etc.)
Whether it’s finally paying off any debts, knowing where to invest, creating a college fund, increasing your retirement contributions, or more, these experts are here to help you.
Create or Update Insurance Coverage
Maximizing an HSA (Health Savings Account) or establishing a life or disability insurance policy can help prepare your family for any potential, unforeseen financial situations that may arise.
Your 50s & 60s
Building wealth in your 50s and 60s looks different from past decades, but these are the years when it becomes clear just how important financial planning by age has been. These decades typically involve prepping for retirement, and you want to ensure your money has stretched over the years to provide a comfortable safety net.
Estate Planning & Prepping for Retirement
If you haven’t discussed the future with your partner or family members, now is a good time to consider it so any dependents understand where money will be going. Bring your family into your financial planning meetings so they’re on the same page.
Social Security & RMDs
Retirement is also a good time to assess when to take Social Security and what your RMD (required minimum distribution) amount is when accessing your retirement funds. While retirement looks different for everyone, the fruits of your labor have brought you here, and the wealth-building tips listed in this article should be used so that you can enjoy this stage of life to the fullest.
If you’re unsure where to begin, a JPMorgan Chase financial specialist is waiting to connect with you so you can bring your financial goals to life.
