Here’s a guide to build wealth, decade by decade – CNBC

Oliver Rossi | Stone | Getty Images

There is never a better time to start building wealth than the present.

Yet how to go about it depends on your age.

“The better job you do with creating your financial security, the more flexibility it provides you to make better choices in the future,” said certified financial planner Carolyn McClanahan, an M.D. and founder and director of financial planning at Life Planning Partners, based in Jacksonville, Florida.

Here’s a decade-by-decade guide to increasing your wealth.

In your 20s

The first thing to do is create an emergency fund. If your job is very secure, have a savings goal of three to six months of expenses. If it is insecure, such as a commission-based sales job, strive for six to 12 months, McClanahan advises.

If your employer has a 401(k) plan and offers a match, contribute enough to get that match.

After that, open a Roth individual retirement account, if your income qualifies, McClanahan said. In 2021, you can contribute a maximum of $6,000.

If you still have money to save after maxing out your Roth, contribute more to your 401(k). In 2021, you can put as much as $19,500 into the account.

At this age, your portfolio can have more in equities than fixed income, since you have more time to recover from any down markets.

Last, make sure you are insured appropriately, especially auto and disability insurance, since one accident or health issue could wipe out any savings you may have.

During your 30s

MoMo Productions | DigitalVision | Getty Images

As you grow in your career, don’t fall victim to “lifestyle creep” and start spending that newfound money, warned CFP Matt Aaron, founder of Washington, D.C.-based Lux Wealth Planning, an affiliate of Northwestern Mutual.

Instead, up your 401(k) plan contributions. The rule of thumb is to put aside about 10% of your income, if you start young, but a financial professional can help you work out the numbers, he said.

After you max out those contributions, start investing outside of your retirement account. Your portfolio should be diversified, with a mix of stocks and bonds.

Historically, stocks return about 7% a year, adjusted for inflation, so it’s important to invest instead of letting it sit in a savings account or under your mattress, said CFP Elaine King, founder of Family and Money Matters in North Miami, Florida.

“Every 10 years, the money has the power to double,” she said.

More from Invest in You:
How to discover your best spending rate in retirement
The …….