13 financial habits that could help you build wealth

1. Set a financial goal

Setting a financial goal is often the first step toward building wealth. Your goal could be buying a home, saving for education, preparing for retirement or financial planning for the first time. With a set goal in mind, taking steps to achieve it can help encourage other positive financial habits like budgeting, saving and investing.

If you’re new to managing your finances, it’s okay to take things slowly. Smaller goals like saving up for a security deposit can teach the same positive habits and strategies for building wealth.

2. Create a budget and track expenses

Budgeting and tracking your expenses can help you make more confident financial decisions. To figure out your budget, assess how much you earn each month. Then, track your expenses to understand how your money is spent.

It may be useful to separate your expenses into two categories: necessary and unnecessary. This wealth strategy can help you identify where you may be able to decrease your monthly costs and boost your savings. If you’re unsure where to begin, try exploring online resources that can help you budget.

3. Establish a timeline

Establishing a timeline to achieve your goal is a helpful practice some people may forget. A timeline can help you stay on track, keep you motivated, determine how much you should save and tell you when to take certain steps.

4. Save

Saving is an essential financial habit that helps you build financial wealth into the future. Saving can help you achieve your goals, eliminate debt, invest and further establish financial security.

To help maintain your savings, it’s important to prepare for unexpected costs. That’s why it’s beneficial to keep an emergency fund as part of your savings strategy.

5. Build an emergency fund

An emergency fund is a savings account that helps you prepare for surprise costs. It’s often recommended you save three to six months’ worth of expenses in your emergency fund.

If your car suddenly breaks down, your emergency fund can help you handle the cost without disrupting your budget. Knowing you’re prepared to handle surprise costs can also help you pursue other positive financial habits like investing.

6. Reduce unnecessary expenses

Reducing unnecessary expenses can help you save when your budget is tight. Consider decreasing costs like monthly subscriptions. Unchecked, subscription fees could take up more of your budget than you realize. By working with customer service, you may be able to cut costs and add-ons you don’t use.

Try exploring more cost-effective options for the services you need and take advantage of discount cards, coupons, promotional offers and seasonal sales.

7. Automate your savings contributions

By automating your savings contributions, you can help simplify the budgeting process and eliminate the chance of spending that money. In turn, this could help you build your emergency fund and achieve your financial goals.

8. Increase your income

It’s much easier said than done, but increasing your income might be necessary to build wealth. Living paycheck to paycheck is a reality for many, and those doing so have often already cut out unnecessary expenses.

Finding a side hustle or using a passion to earn extra income can help expand your budget. Also, try developing more connections with members of your fields of interest to find new opportunities.

9. Learn to invest

Learning to invest is a skill that helps many achieve new levels of wealth through measured financial risk. Investing could help your money beat inflation and increase in value over time.

Understand different investment options.

Different investment options could include individual stocks, bonds, annuities, mutual funds, exchange-traded funds (ETFs) and individual retirement accounts (IRAs). These can be purchased through credit unions, banks, online brokerage firms, mutual fund companies or retirement providers.

In general, different investment options carry various levels of risk.

Diversify your portfolio.

A common strategy used to help minimize risk in investing is called diversification. Diversification is the practice of investing your money in a variety of ways. A diversified portfolio may consist of some or all of the investment options above.

Seek professional financial advice.

Investing can be complex, and researching the investment options that are right for you is key. Meeting with a financial professional can help you better understand your options and find the best way to grow your money.

10. Manage your debt

Eliminating your debt could help give you the opportunity to build your savings, invest and achieve your financial goals. Typically, it’s considered best practice to pay off high-interest debt like credit card debt first because it can save you more in the long run.

If you’re unsure how to manage your debt, meeting with a financial professional can help you plan your payment strategy while maintaining other positive financial habits.

11. Understand taxes

Familiarizing yourself with tax-saving strategies like contributing to a 529 college savings plan, retirement savings accounts or health savings accounts can help reduce the total amount of taxes you’re responsible for paying. Filing your taxes on time can also help you avoid fines and build healthy financial planning habits.

12. Maximize retirement account contributions

Maximizing your retirement account contributions can help you save. Often employers offer a company match for 401(k) plans, meaning they match your contributions up to a certain percentage or amount. Even if you’re unable to contribute much, meeting the employer’s match can help you effectively prepare for retirement.

13. Protect your assets with insurance

Protecting your assets and wealth with insurance can help reduce the financial risk of accidents, cover your investments and safeguard your savings. Depending on what you own, it may be wise to purchase homeowners, auto, renters or disability insurance.

If your goal is to help build generational wealth for your loved ones, life insurance could be a good option for you. Life insurance pays a benefit to your loved ones that they can use to cover expenses, build their emergency fund and invest if you’re no longer there to help.

Building wealth may require learning new financial habits and patience. Especially if you’re not able to save much, it could take some time before you realize the benefits of applying these skills. Simply start by identifying a few habits that feel comfortable as you work toward your financial goals.