True or False: You Need a High Income to Grow Your Wealth

Key Takeaways

1. Your income is not the only factor that affects your ability to increase your net worth

2. Multiple factors may affect how your income is distributed

3. A sustainable approach to wealth creation includes saving, investing and protecting your assets

Everyone loves the idea of quickly getting rich, but have you ever wondered how you can sustainably build wealth? Your ability to increase your net worth is affected by your income—and also how you save, invest, and protect your assets.

Pursuing a combination of wealth creation strategies doesn’t have to feel intimidating. Keep reading to understand how your income impacts your wealth-building potential, and learn strategies that anyone can use to achieve their financial goals.

Is a high income necessary to create wealth?

An income that rises as your career progresses certainly supports wealth creation. However, it is not the only factor that will affect your ability to build wealth over time. Here are some other things to consider:

• ● Changes to cost of living: The ‘cost of living’ is a term that refers to the amount of money needed to cover basic expenses, such as housing, food, taxes, and healthcare, at a certain time. Things like global events, inflation, population changes and the availability of goods can all impact the cost of living, both positively and negatively. If the cost of living is high, this may reduce your ability to grow your wealth, because more of your income is being put towards regular expenses.
• ● Inflation: An inflationary economy, which is characterised by rising prices driven by surplus demand, may significantly diminish your purchasing ability. Over the long term, inflation may erode the purchasing power of your wealth, even if you are saving and investing.
• ● Lifestyle creep: Earning more money may cause many people to spend more money. Lifestyle creep—which occurs if your lifestyle spending increases parallel with your income—may significantly impact your ability to build wealth.
• ● Your financial plan: Following a financial plan is an important part of sustainably growing your wealth, regardless of your income. Setting long-term goals, creating a budget, putting aside savings and investing for your future are all things that can be achieved with sound financial planning.

The wages that you earn from a job or professional career are only one source of wealth. Starting your own business, selling a business that you’ve established and earning investment income are just some of the other ways that you can have a passive income and augment your salary to accelerate your wealth creation journey.

3 Strategies for sustainable wealth creation

More than how much money you make, how you manage your wealth is a major factor that determines your ability to grow your net worth over time. Here are three time-tested strategies for wealth creation—saving, investing, and protecting your assets.

1. Save for more than a rainy day

Saving money may sound like a basic strategy for increasing your wealth, but a savings strategy that maximises your net worth over time involves more than just putting money away each month.

Check out these best practices for saving money:

• ● Identify the savings goals that you want to achieve. What is your purpose for saving your hard-earned dollars? Defining your savings goals is your first step toward saving money effectively and with purpose.
• ● Create a budget that allocates money to savings. Do you use a budget to determine where your money goes? Establishing a budget that allocates a portion of your income to savings may help you to stay on track towards your savings goal. Everyone’s budget is different, but if you’re making a budget for the first time, then allocating 50% of your income to needs, 30% to wants, and 20% to savings may be a good place to start.
• ● Diligently work toward achieving your savings objectives. Are you ever tempted to make an impulsive purchase? Another important part of achieving your savings goals is adhering to your budget, which necessitates spending prudently and avoiding lifestyle creep.
• ● Make your savings account work harder for you. Are you earning interest on your money in savings? Choosing a high-yield savings account with an attractive interest rate—such as the Citi Interest Booster Account that yields up to 4.0% annually—is one way to grow your wealth as you grow your savings.

2. Invest today for your future

Investing in a diverse range of assets is another important wealth creation strategy. Investing can help to protect the value of your money against some of the factors we covered earlier, such as cost of living and inflation. While there are many ways to invest, it is important to educate yourself on the fundamentals of investing. This will help you to create an investment strategy that suits your individual needs.

Here are some tips to maximise wealth creation from your investing activities:

• ● Start early. The earlier that you start investing, the more time you have for compounding interest do its work and grow the balance of your retirement account. You can start investing with as little as S$100 as a Citi Plus customer via the Citi Mobile^® App.
• ● Identify your investment objectives. Defining your investment goals and time horizon is crucial for matching your investing strategy to your wealth creation objectives.
• ● Conduct plenty of research. What’s more important for an investor than doing your research—and plenty of it? Identifying and thoroughly analysing investment opportunities before committing any capital is core to responsibly investing.
• ● Increase your financial literacy. You can boost your confidence as an investor and support your wealth creation goals by building financial literacy. As a Citi Plus customer, gain access to Wealth Digest via the Citi Mobile^® App to access tips and educational content on wealth creation strategies.
• ● Diversify your investment portfolio. Not every investment decision produces a financial gain, but an investment portfolio that’s diversified across industries, asset classes and account types can support your ability to create wealth over time.

3. Protect your assets against the unexpected

Growing your net worth involves more than just accumulating assets. It is also important to protect the resources that you have. Nobody can predict the future, but you can establish financial protection that may help you to cope with unexpected expenses.

One type of financial protection that may assist you to manage unplanned expenses is an emergency fund. This pool of cash—which can accrue interest in a high-yield savings account—should be reserved for unexpected, unavoidable financial emergencies. How much money should be in your emergency account? The answer is different for everyone, but setting aside enough money to cover six months of expenses is a good place to start.

You may also consider using insurance to protect your assets. The type of insurance that you choose depends on the type of assets that you want to protect. Life insurance accomplishes a very different purpose from homeowners’ insurance or business insurance, but all forms of insurance can help you to grow your net worth by preserving your existing assets.

Planning for your financial future

If you have a stable income and you’re already pondering how to effectively grow your wealth, then congratulations! You’re making great progress toward implementing impactful wealth creation and financial planning strategies.

Everyone’s financial journey looks different. However, getting started early with saving, investing and protecting your wealth is a smart way to set yourself up for financial growth. Effectively planning for your financial future can feel easier when you’re equipped with the right tools, like a Citi Interest Booster Account, and educational resources like Wealth Digest and personal finance articles like this one from Life and Money by Citi.

Remember, growing your wealth over time is all about setting meaningful goals, developing a realistic plan, and consistently following through. Find out more about the Citi Interest Booster Account and earn up to 4.0% p.a.* interest on your savings.

Disclaimers

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