5 Ways Immigrants Can Build Wealth Fast
Most immigrants especially first-generation immigrants carry they burden of taking care of not only their nuclear family but the needs of their parents and extended family as well. So building wealth as an Immigrant becomes challenging because the needs of the family often supersedes the income that comes in.
Because of the cultural and financial demands of taking care of the extended family, the importance of building wealth as an Immigrant is even more important. The Urban Institute estimate that it cost about $70,000 to take care of a parent in the US. This kind of financial burden can cause emotional, and physical stress and even ruin relationships.
On the flip side, the absence of financial stress will build stronger family and community bonds.
There are 5 things that are necessary for an immigrant to do as they embark on their wealth building journey. They are :
1- Save at least 15% of annual household income
This number, based on a Fidelity study on somebody who started saving at 25 years. Unfortunately most first-generation immigrants immigrated at a later age. So they are already running behind on time to invest.
The truth is, most immigrants might not be able to contribute 15% of their income into their retirement account. The best thing would be to get on a budget and just start as soon as possible
2- Save money in Tax-sheltered accounts first
The contributions and earnings in tax-sheltered accounts will not be taxed until the money is withdrawn from the account. If your company offers a 401K plan , consider taking at least the match. This is basically FREE money given by your company so turning it down is walking away from free money.
Also make use of your tax favored accounts like your ROTH IRAs and HSAs accounts
Roth IRA contributions are after tax but you withdraw earning tax-free.
HSA- Offers triple tax benefits. You put money tax free, it grow tax free and you withdraw the money tax free. Money can be used for qualified medical expenses.
3- Automate your savings
Automate your savings from your paycheck directly to your savings account
Ensure that you are paying yourself first but putting money in your retirement savings. As we know, life happens. How then can you reduces the chances of you not choosing to save? You Automate.
Have the money withdrawn directly from your paycheck before the rest hits your bank account. Removing the likelihood that you might forget or be influenced to redirect the funds somewhere else makes automation one of the important secrets to saving money.
4-Have a Fully Funded Emergency Fund in Place
You do not want unforeseen circumstances to throw you off your game as you try to build wealth. Have at least 3-6 months of your monthly expenses saved in a separate account for those moments when unforeseen events will happen. You will want to have money for those unexpected emergencies or calls from family members you take care off. In order to be able to save money, you might have to cut back on your expenses for a little while.
5- Get out of Debt
Get out of Debt. Take Back your Income
Debt ties up your money you should be investing. Debt steals time and money from you and prevents you from making use of compound interest. If you bring more of your income home you can bring home, the more money you have to invest.
So before you start saving for retirement and building wealth, you want to have a retirement plan and avoiding financial pitfalls.
Building wealth and trying to navigate a new financial system can be challenging. The most important thing is to make a plan and just START.