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Get Your Finances in Check With These Five Tips

Golden rules of wealth accumulation


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August is National Financial Awareness month, which means it’s an ideal time to assess your ability to understand how money works and gain some insight into your own finances.

A fun way to celebrate money is to visit where it’s made. We’re fortunate to have one of the country’s four U.S. mints located right here in Denver. The Mint offers free tours of the Denver facility, where you can learn about the history and see how they produce billions of coins each year

As far as practical ways to look at where you stand financially, it doesn’t get any more basic than observing some golden rules of wealth accumulation, here are some of my favorites:

Save first, spend second

A general rule of thumb is the 10-20-70 rule. Be generous with 10% of your income, save 20% of your income and live on 70% of your income.

Start early and think long term

Never underestimate the power of compound interest. Let’s look at how long it would take to make a million dollars just by saving alone. If you invested $2,800 a year ($233 a month) and earned the stock market’s historical rate of return of 9% rate of return, you would have a million dollars in 40 years.

Maximize retirement savings

If you have a retirement plan at work, always sign up for your employer contribution to save as much as possible for retirement. Some employers match at least a part, if not all, of their employees' retirement account contributions.

Diversify your investments

Portfolio diversification is perhaps the most basic component in building stable, long-term investment returns. By using a range of asset classes such as equities, fixed income, foreign investments and commodities, among others, you can more effectively manage volatility during challenging market cycles. Portfolio diversification does not provide immunization from severe bear markets, but it can mitigate the damage they inflict.

Identify causes you want to support and build into your monthly/annual budget

By contributing to a charitable cause, our generosity and abundance can produce far-reaching effects on the well-being of others, as well as on our own personal happiness. If you are planning on giving to charitable causes, be sure to identify a cause that aligns with your financial goals and build that amount into your budget to track your expenses. Often times, donations are tax-deductible and may lower the amount owed in taxes.

Becoming financially astute so that you can build wealth that will last a lifetime takes diligence and hard work but following these basic guidelines can help put you on the road to financial happiness and stability.

Jeff Nelligan is a Financial Advisor with the Global Wealth Management Division of Morgan Stanley in Denver. He can be reached at (303) 925-9621 or jeff.nelligan@morganstanley.com.

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