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6 Wealth-building strategies to build your future faster and retire early

The best wealth-building strategies maximize gains while minimizing losses from taxes, fees, and other sources. Learn tips to grow your wealth with this guide.



December 7, 2023

8 min read

What's Playbook? We're your friendly guide to paying less in taxes (legally!) and putting your money in the right places automatically. Money stuff can feel hard, but we’re here to help along the way.

Key takeaways
  • Clear financial goals are the first step to a proper financial plan.
  • Reduced debt, smart spending, and increased assets are essential to increasing your wealth.
  • Work with a mix of professional and robo-advisors to maximize your growth and stay on track.

In this article

      Watching your money grow is a reward that takes patience. 

      Lucky for you, we’re not gatekeeping these savings strategies. Let’s dive in and explore the five best tips to grow wealth over time so that you can stop sweating decimal points and start thinking about how you’ll spend your money in retirement.

      Understanding the basics of the wealth mindset

      Growing wealth is a mindset as much as a journey. Like preparing for a long hike or getting ready to take a hot yoga class, it’s best to know what’s ahead of you before starting off.

      A venn diagram represents how financial discipline and clear objectives create a wealth-building mindset.

      To set yourself up for success, lay the groundwork:

      • Establish clear financial objectives. Start now by defining the purpose of your investing – are you starting your retirement fund, saving up for a house, growing your rainy day fund, or something else?
      • Stay disciplined about your goals. Make consistent, intentional choices that align with your goals, just like you would sticking to a healthy diet or maintaining an exercise routine. Create a budget that reflects your current circumstances to help you get there and live below your means to reign it in.
      • Keep investments on your mind. Start investing as early as you can – now, if you haven’t already. The more time your money has to compound, the more it will grow by the time you start withdrawing funds.

      6 best ways to build wealth 

      These six strategies are the best tips to keep in mind for long-term wealth creation.

      1. Minimize the impact of taxes on your assets.

      One of the most important parts of any wealth-building strategy is minimizing taxes. Even if you timed the market perfectly, tax-efficient investing can lead to higher after-tax returns.

      A star covers a piggy bank with the advice that tax strategies can help you save 13.2% more.
      See full methodology here.

      When you consider all the benefits that tax minimization has to offer, you might wonder why you didn’t try it sooner. But it’s not your fault. Tax minimization isn’t talked about as much as investing in the stock market or gaining interest on a savings account – even though it’s far more reliable than the first and more lucrative than the second!

      Tax minimization helps you:

      • Preserve more of your income. Taxes erode your income and wealth potential, plain and simple. Minimizing your tax burden ensures that a larger portion of your earnings remains available for saving, investing, and growing your wealth.
      • Compound growth. Wealth-building often involves long-term investments. When you minimize taxes on your investment gains, your money can grow and compound more effectively, removing obstacles from your path to wealth growth.
      • Optimize returns. Different investments come with varying tax implications. Tax-efficient investing involves selecting investment vehicles that align with your financial goals and tax circumstances. For example, investing in tax-advantaged accounts like Roth IRAs or 401(k)s can lead to a significant boost in after-tax returns.
      • Plan your legacy. As wealth grows, so does the potential for estate taxes. Effective tax minimization strategies can help ensure your wealth goes to your heirs or beneficiaries with minimal tax consequences. Proper estate planning can involve trusts and gifting strategies to optimize wealth transfer.
      • Manage risks. Some investments come with tax benefits that can help offset losses in other areas, thereby managing overall financial risk. Tax-loss harvesting, for instance, allows you to use investment losses to offset taxable gains, reducing your tax liability.

      Tax minimization should always stay within the bounds of tax laws and regulations. Engaging in legal tax planning strategies ensures that you build wealth while staying in compliance with the law, avoiding penalties or legal issues.

       2. Live as far below your means as possible.

      No matter how much you’re able to legally save on taxes, you’ll still end up paying some. However, living below your means allows you to continue saving and investing to grow your wealth.

      It doesn’t mean you have to give up every possible comfort, miss every concert, or skip out on ever taking a vacation. But living below your means involves denying yourself some pleasures in the present so that you preserve money for retirement when you’d rather not worry about supplementing that income with a job.

      One of the best ways to live below your means is to lay down the law with a household budget that you stick to no matter what. This gives you a better view of money coming in and going out, so you can focus more on your needs than your wants and learn to live with a little less, whatever that looks like for you.

      3. Make wise investments – and play the long game.

      You can make investing decisions that get you closer to your retirement goals than timing the stock market perfectly would. And let’s face it: you won’t time it perfectly. But you can manage your risk tolerance or how likely you are to hold onto investments when the market gets shaky.

      Illustration states that diversifying your portfolio and managing risks make for smart investments.

      There are many ways to invest your money – too many to count, even. But there are a few common investments (or asset classes) you should know about:

      • Individual stocks: Shares in a company’s value historically provide positive returns over the long run. However, this isn’t always the case (stock market crash, anyone?). Individual stocks can be volatile, so they shouldn’t take up a majority of any investment portfolio.
      • Individual bonds: These are essentially loans that you provide to the government (or a corporation), and in return, you receive interest periodically. They’re a more conservative option than stocks because they can provide a steady income stream and balance out a portfolio heavy in riskier investments.
      • Retail funds: These are professionally managed pools of money, like mutual funds and ETFs, overseen by a fund manager who selects a blend of assets for you and other investors in the pool. While less risky than individual stocks because they spread investments, retail funds can still lose money.
      • Real estate: This can be a tangible and lucrative investment, but it often involves more cost and risk than other investment types. We’ll cover real estate investments more in-depth a little later on.

      Aim to invest in index funds as much as possible – it’s a way to purchase across the entire stock market at a lower cost than buying individual stocks. That means mutual funds or exchange-traded funds (ETFs), which are similar to mutual funds but purchased at market price and don’t usually have minimum purchase requirements.

      There are many rules of thumb that you can follow to allocate your investments. Try the following for the simplest idea of how much money to invest and where:

      • OYAIB rule: The “Own Your Age In Bonds” (OYAIB) rule measures how much of your money should be in bonds, generally considered a less profitable but also less risky investment than stocks. Whatever your age, you should allocate that much of your portfolio to bonds. If you’re 30, just 30% of your investments should be in bonds, for example.
      • 100 minus age rule: The flip side of the OYAIB rule is to subtract your age from 100 and put that percentage of your portfolio in equity investments – a riskier investment with greater potential to fluctuate, like company stock. Keep the rest in debt, which guarantees lower but more stable returns, with options like bonds.

      No matter the investment types you deem suitable for you, there are two key ideas to keep in mind that go hand-in-hand:

      1. Diversify your investments
      2. Manage risks to reap rewards

      Diversify to spread your investments around.

      Diversification is how to make your investment portfolio a little more guarded against the usual ups and downs of the market. Putting your eggs in different baskets ensures that you don’t lose all your eggs if one of the baskets breaks.

      The goal of diversification is to have investments that don’t all move in the same direction at the same time. By diversifying, you can potentially lower the overall risk of your portfolio while still aiming for substantial returns.

      Manage your risks to reap your rewards.

      Investing can offer great growth opportunities, but it’s crucial to effectively manage risk in your portfolio. Risk comes in many forms, including market volatility, economic downturns, and even geopolitical events (the COVID-19 pandemic was a combination of all three, for example).

      Mitigating risk involves strategies such as asset allocation, regular portfolio rebalancing, and staying informed about market trends and global events.

      Younger investors with a longer timeline may be more comfortable with higher-risk investments, while those nearing retirement may opt for a more conservative approach. It’s all about aligning your investment strategy with your goals and comfort level.

      4. Learn the good, the bad, and the ugly about debt.

      Unless you have unlimited cash flow, you’ll probably take on debt occasionally to finance large purchases like a house, a car, or a college education. And that’s perfectly fine – debt, when managed wisely, can be a key part of building wealth.

      Here’s why debt can play a crucial role in wealth-building:

      • Tax advantages: Certain types of debt often come with tax benefits. For example, interest from mortgages or federal student loans can be tax-deductible. This reduces your taxable income and, in turn, can lower your overall tax liability, leaving more money in your pocket to invest.
      • Leverage for investments: Taking on debt can allow you to invest in assets that have the potential to appreciate, like real estate or a business. When the value of these assets grows over time, they can exceed the cost of the debt, contributing to your overall wealth.
      • Credit building: Managing debt responsibly can help you build a strong credit history. A good credit score can open doors to favorable terms on future loans, like lower interest rates, making it easier and more cost-effective to borrow when needed for wealth-building ventures.
      • Access to opportunities: Debt can provide you with the financial means to seize opportunities you might not have otherwise. For instance, a business loan can help you start or expand a business to generate income and build wealth over time.
      • Inflation hedge: Inflation erodes the purchasing power of money over time. With low-interest debt, you can effectively repay with dollars that are worth less than when you initially borrowed, reducing the “real cost” of the debt.
      Image compares good debt like mortgages and bad debt like credit cards.

      However, there’s good debt and bad debt. Good debt refers to borrowing money to potentially increase your net worth or generate future income, like:

      • Mortgage debt
      • Student loans
      • Business loans

      On the other hand, bad debt refers to borrowing money for purposes that don’t contribute to your financial well-being or might even hinder it, like:

      • Credit card debt
      • Consumer loans
      • Payday loans

      The distinction between good and bad debt hinges on whether it will serve your financial goals.

      5. Take advantage of passive income streams.

      Passive income represents income generated with minimal ongoing effort or active involvement. It’s a cornerstone of wealth-building because it continues to produce income while you’re not directly involved with it.

      Illustration of money growing in a pot that states "rely on passive income to grow your wealth faster."

      Passive income helps you diversify your income sources beyond your job, with possible sources like:

      • Rental income from real estate
      • Dividends from investments
      • Royalties from intellectual property

      These all provide diversification and reduce your reliance on a single income stream, making your long-term wealth growth more stable and sustainable.

      Passive income also gives you time and freedom, which are two of the main goals of building wealth in the first place. It can even act as a financial cushion, providing a steady income stream during economic downturns or unexpected financial challenges when your earned income might be at risk.

      6. Adapt as you grow.

      Once you hone in on your goals and start building wealth, you need to keep one hand on the wheel and one eye on the road – that is, make sure that you’re aware of the ongoing status of your financial accounts and that you can interfere to correct or change course when you need to.

      Update your financial plan based on life changes to maintain goals and flexibility.

      These are some great ways to adapt:

      • Protect your ass(ets): Create a simple financial tracker to monitor your income, expenses, and investment performance. This dashboard helps you stay on top of your financial progress.
      • Stay flexible: Life is unpredictable, and sometimes you encounter detours or unexpected obstacles that force you to change course. When that happens, don’t be afraid to adjust your strategies. In fact, building wealth is all about shifting your game! Whether it’s a sudden expense or a change in your goals due to a life event, flexibility is your ally. Revisit your budget and investment plans to ensure they align with your current circumstances.
      • Measure your progress: Your wealth-building goals are destinations on your road trip to early retirement. To ensure you’re headed in the right direction, keep checking the map to assess your progress. Are you getting closer to your goals, or should you adjust? Analyze savings, investments, and debt reduction efforts.
      • Seek expert advice: Even seasoned travelers consult maps and guides. Consider seeking advice from financial experts to provide valuable insights and help you make informed decisions. They can assist you in navigating complex financial terrain and provide direction when you encounter changes.
      • Automate when you can: Using an automated financial planning tool can help you rest easy knowing you’re making the best decisions about your money related to your goals.

      Leave money stress in the past by building wealth for your future.

      Learning how to grow wealth can seem like finding a needle in a haystack, searching for a constantly changing answer. But it doesn’t have to be that way.

      One of the easiest way to grow your money is to beat taxes, not to gamble with the market. It’s a smart way to manage your wealth-building strategies all in one place through automation. That way, your mind is always on your money without money always being on your mind.

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      About the author

      Phil Wettersten, Series 7 & 66

      Head of Product Success

      Phil holds both Series 66 and Series 7 credentials and previously served as an Investment Consultant at TD Ameritrade. At Playbook, he's the authoritative voice representing our customers, spearheading product enhancements and strategic planning. Phil's unwavering dedication keeps us ahead in delivering top-notch user experiences.

      Tanza Loudenback, CFP®


      Tanza is a CFP® certificant, writer, and editor. From 2015 to 2021, she was a top-read author and editor at Insider. Her work focuses on helping people make smart decisions with their money and is published by a variety of online publications.

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