Ten Steps to Seven Figures

Barbara O’Neill, Extension Specialist in Financial Resource Management

Rutgers Cooperative Extension


April 2019

Ten Steps to Seven Figures

One of the most frequently cited purposes of investing is to build wealth for future financial goals such as a new car, a college education for children, and financial security in later life. Many people even have a specific dollar amount in mind such as having $1 million saved by the time that they stop working. 


Below are ten recommendations to build wealth over time:


Pay Yourself First- Make investing for retirement a high priority in your household budget. Consider savings for retirement and other financial goals a “fixed expense” like a car payment, rent, or a utility bill. Try to make investment account deposits automatic via payroll deduction or enrollment in an automated investment plan.


Pay Off Credit Card Debt– Interest on credit card debt is a big drag on wealth-building efforts. When minimum payments are made on a credit card balance, goods and services can end up costing almost twice as much as their original cost. To avoid this situation, strive to pay credit card bills in full and spend accordingly.


Seek Growth Opportunities- While savings often starts out in low-risk, low-return assets, such as savings accounts, money market funds, and certificates of deposit (CDs), “ownership” assets such as stocks and stock mutual funds offer the largest potential to maximize the growth of savings over time.


Save Small Regular Amounts– Small amounts of savings over long periods of time can really add up. For example, starting at age 25, a bi-weekly deposit of $100 earning a 6% average annual return will grow to $431,490 by age 65 according to Advantage Publications. Weekly $100 deposits over 40 years will grow to $862,979. Time and compound interest are a long-term investor’s greatest allies.


Start Saving Immediately– Compound interest is not retroactive. In other words, you cannot earn money on money that was not previously saved. To “find” money to put into long-term growth investments, cut out or scale back (e.g., buying 2 lottery tickets instead of 5) spending on small, but unnecessary, expenses.


Complete a Savings Challenge– Savings challenges have been developed for every budget and time frame. Examples include saving $100 in 30 days and $2,500 in 50 weeks. Challenges provide structure by suggesting regular savings deposits. Once the savings goal is reached, the money can be invested for long-term goals.


Kick It Up a Notch- When earnings from a job increase with promotions or household expenses (e.g., child care and car loan payments) end, adjust your savings upward without having to cut back on household spending. Some employers also allow workers to “auto escalate” savings and save more when they earn more.


Diversify Your Portfolio– Diversification will reduce- but not eliminate- investment risk. Select different asset classes (e.g., cash equivalent assets such as CDs, stocks, bonds, real estate) and different investments within each asset class (e.g., U.S. stocks, foreign stocks, and stocks from companies in different industry sectors). Another option is investments, such as mutual funds and exchange traded funds, that are already diversified.


Take Prudent Investment Risks– Prudent risks have real potential to increase your investment return. For example, high quality blue-chip stocks. The biggest risk in long-term investing is avoiding stocks completely. People who put all of their money in cash assets often lose purchasing power after taxes and inflation. For a “low-maintenance” approach, “buy the market” with index funds or exchange-traded funds (ETFs).


Take Advantage of Available Tax Breaks– Practice tax avoidance by using available tax code provisions to pay no more income tax than you are legally required to. Some specific ways to do this include holding investments for more than a year to pay long-term capital gains tax rates and making deposits to tax-deferred employer retirement savings plans and tax-free Roth IRAs.


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