How To Build Wealth When You Can't Even Afford To Take Financial Risks
According to a recent BHG Financial report, economic uncertainty makes it harder for most Americans (65%) to make sound financial decisions. Another 31% say they’ve relied on credit cards to cover essential expenses, while 38% say they’re likely to miss a debt payment in the next six months.
While the common consensus is that saving and building wealth matter, many people feel they can’t afford to take the financial risks that come with that. If this sounds a little too familiar, know this: Building wealth doesn’t necessarily mean taking risks. It can, of course, but there are smarter ways to go about it.
Here are just a few.
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Automate Your Savings
If you’re unable to be classically “risky” with your finances or if you don’t have much wiggle room, that’s okay. You can still build wealth. It just might take some time.
“It may sound boring, but the best thing you can do is set up an automatic savings plan (even if it is just a small amount each week/month) and build up your emergency savings account in a high-yield savings account,” said Derrick Schuler, wealth planner and certified financial planner (CFP) at Schuler Wealth Planning. “This develops good habits, earns a decent interest rate and provides flexibility if you need to withdraw the money without incurring penalties.”
High-yield savings accounts earn more interest than traditional checking or savings accounts. They’ll help your balance grow more quickly. The more you save, the more your earnings will increase.
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Contribute Consistently to a 401(k)
A Gallup poll found that six in 10 Americans have some kind of retirement savings account — like a 401(k) or IRA. If you’re not already contributing to one, now is a good time to start.
"Most employers offer 401(k)s to help employees save for retirement. The best part about 401(k)s is employers will typically match your contribution up to a certain amount which is essentially ‘free money’ as long as you meet service time requirements,” said Tom Betros, chartered financial analyst, CFP and wealth advisor at D'Arcangelo Financial Advisors.
Typically, 401(k) accounts have investments called “Target Date Funds.” These are basically diversified investment vehicles (like mutual funds) that can grow your savings over time.
If you have a little financial wiggle room, increase your contributions. For 2026, the IRS allows most 401(k) account holders to invest $24,500 annually. Invested over a long period of time, there’s potential for significant gain.
Allocate Savings to Specific Goals
“I recommend a simple automated approach for young investors — setting up pools to fund priorities and goals,” said Breanna Seech, senior wealth advisor at Mariner Wealth Advisors.
So, what does this look like? Start with a realistic household budget. That way, you’ll know how much you’re earning and where your money actually goes each month. After that, map out some short- and long-term financial goals.
Seech suggested determining allocations to specific pools, like:
Safety
Milestone purchases
Growth
Retirement
And start as soon as you can for the biggest benefits.
“I highly suggest every client contribute something to the growth and retirement pools,” said Seech. “Time is incredibly valuable as an equity investor and something you cannot make up for in the future.”
Avoid Locking Up Your Money
“The worst thing you can do, if you don’t have wiggle room, is lock money up in a financial product or an account that will penalize you for taking it out,” said Schuler.
An example of something you might want to avoid is a long-term certificate of deposit (CD). These might earn higher APYs than your standard savings account. The trade-off is that you can’t access the CD’s funds until a certain date — often six months to a year after opening the account. If you do withdraw funds, you’ll get hit with a penalty. To avoid this, some people have set up rolling CDs to ensure ongoing available income every month, in times when CDs out-earn traditional bank accounts on interest.
Educate Yourself
Schuler suggested educating yourself about financial planning, building wealth and investing. Even if you can’t currently afford to invest, you might be able to in the future. And when that time comes, you’ll be ready.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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