Many believe that low-and moderate-income families cannot afford to save and build wealth. Yet research shows that there are “savers” and “spenders” in all income classes. While those with modest incomes cannot save as much as the affluent, almost all have the ability to build wealth over time. Through contributions to a workplace retirement program, home purchase, and other savings, during their working years most can accumulate six-figure assets.
How Can You Achieve Your Financial Goals and Peace of Mind? Here are Easy Ways to Save and Build Wealth:
1. Pay off high-cost debt. The best investment most borrowers can make is to pay off consumer debt with double-digit interest rates. For example: if you have a $3,000 credit card balance at 19.8% interest, and you just pay the required minimum balance, it will take 39 years to pay off the loan. And you will pay more than $10,000 in interest charges.
2. Buy a home and pay off the mortgage before you retire. The largest asset of most middle-income families is their home equity. Once families have made their final mortgage payment, they have far lower housing expenses. They also have an asset that can be borrowed on in emergencies or converted into cash through sale of the home.
3. Participate in a work-related retirement program. Many employees turn down free money from their employer by not signing up for a work-related retirement such as a 40l(k) plan. If employees participate, with a dollar-for-dollar match they would likely receive an annual yield of greater than 100% on their investment.
4. Outside of work – save monthly through an automatic transfer from checking to savings. Savings such as these will provide funds for emergencies, home purchase, school tuition, or even retirement. Almost all banking institutions will automatically transfer funds monthly from your checking account to a savings account, if you request it. The old saying, “What you don’t see, you probably won’t miss.” is true.
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Written by: Mary Linda Moore, Family Resource Management Area Agent
Submitted by: Juli Hughes, County Extension Coordinator MSU Extension Service – Choctaw County