An accurate budget: Know yourself to set the right goals

The first step in building wealth is to set a plan, so build a detailed budget of expenses and incomes, as well as short- and long-term goals and needs. Budgets are a critical training ground to get to know how you spend and save, as well as identifying what you can change in service to your larger plan—like reducing entertainment spending to accumulate more for your savings account.

More than anything, budgets must be accurate to be useful. If you don’t factor in your penchant for Friday night pizza, or your electronic book purchases, you may be setting yourself up for disappointing results later. And just as you should be honest in your budget by being realistic and identifying trouble spots, you should also be realistic when setting goals. If your goals don’t align with your lifestyle or are too much of a stretch, even the best financial strategies may not help you reach them.

Resilient savings plan: Pay yourself first

One of the most important financial strategies is to set aside savings. With a savings account, you can be ready to face unexpected expenses or events.

When creating your budget, build in an amount each month that’s allocated specifically for savings. Some financial professionals call this tactic “paying yourself first” because it helps ensure you are saving for “future you” opportunities in addition to paying for “current you” expenses. Even if this amount is small at first, simply adding it as a must-have line item can start ingraining the habit. And small amounts build up over time—whether it’s months or years in the future.

And, most importantly, savings should be used only for what they are designated for, whether that’s vacation, emergencies or a life event, like buying a house. Keep those funds safe from everyday spending, no matter how enticing the sale, item or experience.

Responsible credit card use: A little help when you need it

Even with a set plan, there can also be value in having a little help from time to time. With that in mind, one of your financial strategies could be to use a credit card to make the purchases you need now, whether it’s last-minute childcare expenses or unexpected medical costs. Research credit cards with perks that help you reach your financial goals faster, like cash back rewards.

One caveat to credit cards: if you are a beginner in laying your financial foundation, maintaining a credit card can be tricky. It’s important to budget for paying down or paying off your credit card balance each statement to prevent interest from accumulating. However, the benefits can be worth the effort of careful use and responsible payments. For example, credit cards can help you build up your credit score and can be a more secure way to pay due to their enhanced fraud protection.

Ways to continue to build wealth: Know areas to cut back and areas to grow

One of the first ways to stay on track when building your wealth is to limit your spending – notably, to ensure you are not spending more than you are bringing in. Take the time to review your purchases monthly and identify areas you can cut back (i.e., eating out, unused or overlapping subscriptions, and pricey groceries).

Next, look for ways you can earn additional money. This extra income could come from a side hustle using your skills, such as charging for your photography or baking services, or from selling household items and clothes you no longer need. A third way to increase your wealth might initially sound like a contradiction: paying down debt. Managing your debt is a productive way to build your wealth for the long term. By working toward eliminating debt, you are setting yourself up for a future with more funds for saving or investing.

Develop your retirement savings plan: Decide what matters most to you

An important aspect of building and maintaining your wealth is planning ahead. The Centers for Disease Control and Prevention has found that women on average live about six years longer than men. This might feel a bit morbid to plan around but it is crucial to know the ways you differ from your male counterparts as you navigate and develop your unique financial plans.

On top of traditional retirement saving avenues like individual retirement accounts (IRAs), 401(k)s and pension plan, make sure you are paying close attention to your health savings account (HSA). Your HSA contributions coupled with a high deductible health plan (HDHP) can help you save for medical and long-term care expenses later in life.

Additionally, when considering your retirement plan, spend time thinking about the financial legacy you are building and what you want to leave behind for your loved ones or other causes you support. By meeting with a financial advisor well before retirement age, you can better ensure your wealth is protected for future generations.

Sustainable investing: Find your strategy

As you work through your budget and saving plans, you might notice you have some extra funds you’d like to invest. When it comes to establishing your investing strategy and goals, you should first verify exactly how much extra money you have to invest, while also considering your earning power. According to a Forbes Advisor study, there is still a wage gap between women and men, with women on average earning about 16% less than their male counterparts. This is important to be aware of as your income, financial history and gender could play a role in your investing strategy and sustainability.

As you consider where to invest your extra cash, determine your risk tolerance when it comes to each of your potential investments. Your risk tolerance refers to the degree of risk you are willing to take when it comes to the uncertainty of the market in relation to your investments. In other words, you need to decide how comfortable you are with the idea of losing money, and your expectations for earning it back.

While it can be difficult to gauge your appetite for risk and develop your strategy for investing, remember you are not alone in this process. Your financial advisor can help you handle the ins and outs of investing and how it can impact your finances.

Doing good with extra cash: Charitable giving

Once you have established and maintained a responsible outlook on your finances, you may find yourself with some extra money and a desire to do good. With these extra dollars, consider taking an active approach to helping others through charitable giving that supports your values.

If you find yourself in a financial position to help others, there are numerous resources that provide ratings and reviews of nonprofit and civic organizations across the world. Some financial strategies to consider if you want to plan for charitable giving include:

  • Watch for scams: Unfortunately, even charitable giving can be an activity vulnerable to scam artists. To help prevent fraud, make sure you know the person or organization you are donating to, research the nonprofit on a charity rating system like Charity Navigator‡, and never donate via email or over the phone.
  • Don’t stretch your budget: Generally, your money can go further if you donate it as a larger chunk to one organization rather than spreading it thinner across many. But, no matter how you choose to donate, make sure the amount is aligned with your financial plan and monthly budget.
  • Expand your outlook: Supporting your community can extend beyond your cash donations. Consider volunteering, serving on nonprofit boards and investing in environmental, social and governance (ESG) portfolios, which place emphasis on companies and stocks that operate sustainably.

Finding financial strategies that work for you

Above all, the most powerful wealth-building tool you can yield is to find financial strategies that help you stick to your long-term plan. As you continue to cultivate financial independence, take steps to learn about your money, establish a savings account, take advantage of credit card benefits, look for ways to build your wealth, account for your retirement, invest and contribute to your community.

You need to earn, grow and plan for the life you want, and beyond. Stay in the know with UMB and learn more about how we support Women and Wealth.

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This material is provided for informational purposes only and contains no investment advice or recommendations to buy or sell any specific securities or engage in any specific investment strategy. Statements in the presentation are based on the opinions of the author and are subject to change at any time without notice. You should not use this presentation as a substitute for your own judgment, and you should consult professional advisors before making any tax, legal, financial planning or investment decisions. UMB Financial Corp., UMB Private Wealth Management and UMB Financial Services, Inc., and their affiliates, directors, officers, employees or agents do not accept any liability for any loss or damage arising out of your use of all or any of this information.

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