Prepare to Build Wealth with These 3 Steps from a Financial Expert

Preparation is the key to success in many areas of life, but some people overlook the preparation needed to create financial stability and growth for the future. Observing the financial success of others makes it seem effortless. In fact, most successful people plan in every area of their lives, including their finances.

The strategy for achieving wealth is the same for everyone, the only difference is time. It will take some people longer than others, but everyone can get there.

“When I talk about building wealth, I mean generational wealth, the kind you can leave to your kids and your grandkids, your favorite charity…the kind of wealth that is still producing long after you’re gone,” says Jason Hasson, financial planner with Northwestern Mutual Insurance.

Creating a financial plan may seem complicated, but it can be broken down into three basic steps.  “Think of a financial plan like climbing a ladder with wealth at the top,” Jason explains.

1. The first step, the bottom rung of the ladder, is insurance. You must put the right life, disability and long-term care insurance products in place to protect your money. Insurance is there to hedge against life events like major illnesses or bad accidents. Without the right insurance, these events could derail your plan to build wealth. You could be wiped out and have to start over.

2. The second rung of your ladder to wealth is investment accounts. With your insurance rung secured, you can build an investment portfolio that includes IRA, 401(k) and other retirement accounts. As your investment portfolio grows, it will generate more opportunities to invest in real estate, business or some other ways to increase your net worth.

3. The top rung on your ladder is a liquid account you have access to for important or emergency purchases. The big emergencies will be covered by insurance, but you need a liquid fund for other large expenses. When your air-conditioner quits in the middle of summer, you don’t want to sell off investments prematurely or face tax penalties for borrowing from your 401(k). An emergency fund will allow you to deal with large expenditures without upsetting your long-term investment plans.

These three steps are the same for everyone no matter what your current financial situation or your age. Timing is what differentiates results for different people. If you didn’t start building your nest egg in your twenties, you can start today. Depending on your income and other financial obligations, you could reach your financial goals in ten years or in forty years. What’s important is that you get started.

“There’s no threshold to begin building wealth,” Jason explains. “Saving just $50 a month is a start. Think of it as paying your future self.”

Building wealth is about planning for the future, your future and future generations. Following a plan to protect what you have, budget for what you need and save for the future is the best way to achieve your financial goals.