By Melanie Slone
“Building wealth isn’t just about money—it’s about agency, dignity, and control,” says Gary Acosta, CEO of the National Association of Hispanic Real Estate Professionals (NAHREP). Here are the basics of building wealth in the United States.
Five ways to save.
- Have an amount automatically deducted from your paycheck every month and base your budget on what is left. A savings account at a financial institution is fully insured by the Federal Deposit Insurance Corp. (FDIC) or the National Credit Union Administration (NCUA) for up to $250,000.
- Invest in stocks. This money is not insured, meaning if the stock market goes down, you lose money. But if the stock market goes up, you can make much more than with a savings account.
- You can purchase a certificate of deposit (CD) at a locked-in interest rate for a specified term (maybe 1 year) and get back the money plus interest at the end of the term.
- Home ownership is the easiest way to build wealth. If you own a home, you have equity—the difference between the market value of the house and the balance on your mortgage. If the home rises in value, you get more money when you sell it.
- A 529 College Savings Plan allows you to save money for your children’s education tax free.
Five things to remember when creating a budget.
- Save at least three to six months of living expenses for an emergency.
- Track all your spending and don’t spend more than you make.
- Stick to your budget and put any leftover money, even if it’s only $10, into savings or investments.
- Pay off your credit cards as part of your budget.
- Make regular contributions to retirement savings.
Five ways to improve credit.
- Lenders use your credit report to decide how much credit to give you. Check it once a year for free by calling 877-322-8228; or visiting www.annualcreditreport.com.
- A credit card does not create income. You must pay for the purchases you make with it.
- Attempt to pay the entire amount you owe every month, so you don’t have to pay interest.
- Shred or destroy your credit card and bank statements before you put them in the trash. Don’t give out personal information unless you’re sure who the person asking is.
- Always read the fine print on any loan application and don’t be afraid to ask family members or experts for help.
Five tips for investing.
- Buying common stock means you become part owner of a company and are a stockholder or shareholder. If the value of the stock goes down, you lose money. Mutual funds put together money from many people and invest it in many firms at the same time, which lowers the risk.
- An individual retirement account (IRA) grows your money tax free until you retire and withdraw it.
- A traditional IRA is tax-deferred, so you don’t pay taxes on the money until you withdraw it. If you withdraw it before age 59, you pay a penalty.
- A Roth IRA is made up of after-tax earnings, so you don’t have to pay taxes on it when you retire or turn 59 and withdraw it.
- With a 401(k), you authorize a certain percentage of your before-tax salary to be deducted from your paycheck. When you receive less in your paycheck, you pay less in federal and state income tax. Often, your employer will match a portion of what you put into your 401(k).
Five points for peace of mind.
- The main cause of bankruptcy in the United States is medical costs. It is important to have medical insurance. You may qualify for help with Covered California. You should also have home and auto insurance.
- Keep your legal documents safe and get help from financial advisors, tax preparers, and immigration attorneys. Set up living trusts and beneficiaries.
- Diversify your income with side gigs or renting to others.
- Give to charity and give back to your community.
- Finally, teach your children about money to build generational wealth.
As the Latino financial advisor Louis Barajas says, “True wealth is never just about numbers. It is peace of mind, emotional well-being, stronger relationships, and the ability to create a legacy that honors your roots.”
