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- If you’re maxing out a retirement plan and being mindful of your investments, you may be on the fast track to building wealth.
- To be sure, most people don’t get rich overnight. But, if you avoid high-interest debt, are focused on increasing your income, and have clear goals and a plan to achieve them, you’re doing better than you think.
- Need help building wealth? SmartAsset’s free tool can help find a financial planner near you»
You have to commit to building wealth — it rarely happens by accident.
Below, seven signs you could be rich sooner than you realize.
1. You max out your retirement accounts every year
IRAs and 401(k)s are two of your greatest allies in setting yourself up for a comfortable retirement.
If you can afford to put the full $19,000 into your 401(k) this year — or you’re moving closer to that limit — you’re accomplishing a few things.
First, you multiply your earning potential in the market. Second, if your company offers to "match" your 401(k) contributions, you score that free money. And lastly, you shelter a sizable chunk of your income from income taxes (you’ll pay those taxes later, but for now your money grows tax-free).
You can also contribute up to $6,000, or $7,000 if you’re over age 50, to an IRA in 2019. The tax savings are set up differently than a 401(k), but the fundamental strategy is the same: The more money you put in the market now, the more you stand to earn.
2. You’re thoughtful, but not obsessive, about your investment choices
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If you’ve made thoughtful choices about where to invest the money you put into your 401(k), you’re head and shoulders above the rest.
Too many people make the mistake of treating their 401(k) like a savings account and don’t touch the money once it’s in there, certified financial planner Eric Roberge previously told Business Insider.
Some 401(k) plans have a fine default investment selection, but you should always double-check to make sure it matches your own time horizon and risk tolerance, Roberge says.
You’re in good shape so long as you choose investments that diversify your portfolio — i.e. a mix of stocks and bonds — and don’t levy too many fees. Roberge recommends choosing either an all-in-one target date fund, which automatically rebalances itself, or building a portfolio of individual funds that provide appropriate diversification.
Checking on your asset allocation periodically to ensure it matches your overall risk tolerance is smart, but obsessing over the details could easily lead to emotion-fueled mistakes.
3. You’re focused on the ‘big wins’
Spending less than you make may be the golden money rule — but it’s not the only rule.
Yes, it’s important to cut your spending "mercilessly" on the things that don’t add value to your life, says financial expert and bestselling author Ramit Sethi. But people who are good with money know that $2 here and $10 there won’t make you rich, he says.
"There are a few Big Wins in life where — if you simply get them right — you almost never have to worry about the small things. If you can focus on the 5-10 Big Wins, rather than 50 little things, you can have an insurmountable edge in life," Sethi says.
For example, paying down debt, saving automatically, negotiating a higher salary, and investing early will have a much greater impact — and in a shorter timeframe — than forgoing your morning coffee or weekly brunches.
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