Following last week’s article Why Aren’t You Rich?, several people reached and said they wished there was a step-by-step guide that explains how to put my advice into action. I realize there are a lot of novice investors out there who could use a little help, so today I will provide you with a blueprint for easily building wealth over time.

What I will describe is simple. Once you get this set up, you don’t really have to do anything else. If you later decide to become a more active investor, there are certainly more techniques to help boost your wealth. That’s what the columnists here at Investing Daily are all about. But if you want to put in the minimum amount of effort and just sit back and automatically grow your wealth, here’s what you need to.

Step 1: Identify how much money you can afford to save.

If you already have money in your budget beyond what you spend each month, that’s great. This step will be easy. But the more you can afford to save, the faster you will build wealth.

Look at your monthly spending to see if you can identify some low-hanging fruit. Maybe you have to make a small sacrifice. Many of us spend a lot of money each month at restaurants or on take-out. You could reduce your spending by one or two meals a month and direct that money into savings. We make many purchasing decisions each month, so there are many opportunities to find savings that can be invested.

Step 2: Eliminate any high-interest debt.

Over the past 90 years, the average annual return of the S&P 500 is 9.8%. The S&P 500 is a stock market index that contains the 500 largest companies trading on stock exchanges in the U.S. As I will explain below, you can invest directly in a mutual fund (a fund that pools money from many investors) which aims to replicate the S&P 500.

However, before directing money into such a fund, you need to identify and eliminate any debt with an interest rate above about 7%. The reason for this is that if you are earning 9.8% in the stock market, but you are separately paying debt with an interest rate of 7%, you are doing so with after tax dollars so it is equivalent to 8-10% returns in reality.

You really aren’t gaining ground. What you earn in the market is being lost to interest payments. And if the interest rates are higher than this, you are really losing ground. Find savings in your budget and pay off those parasitic high-interest debts.

Step 3: Establish an emergency fund.

This isn’t absolutely required, but I would recommend setting aside the first few weeks or months of your savings into an emergency fund. That will help keep you from dipping into the growing nest egg we will build in the next step. You should view that money as absolutely off limits and a little cushion in a savings account will help keep it off limits.

If you want to get started investing right away, dedicate some portion of that investment into establishing this fund.

Step 4: Set up a mutual fund account that invests in an index like the S&P 500.

This is where the wealth-building takes place. Contact one of the major investment companies such as Fidelity or Vanguard. If you call Fidelity at 1 (800) 343-3548, ask for a prospectus to the Fidelity ZERO Total Market Index Fund (FZROX). This fund has no transaction fees and no management expenses associated with it. The fund invests in all of the largest companies in the U.S. such as Microsoft (NSDQ: MSFT), Apple (NSDQ: AAPL), Johnson and Johnson (NYSE: JNJ), etc.

If you call Vanguard at 1 (877) 662-7447, ask for a prospectus for the Vanguard Total Stock Market Index Fund (VTSMX) (or something equivalent). It’s similar to Fidelity’s offering but entails a tiny 0.14% annual expense fee, which is the case with most mutual funds. This isn’t a fee that you pay directly; it is deducted over the course of the year. It’s so small that I wouldn’t let that dissuade you from investing in Vanguard instead of Fidelity, but if you find a fund at a different company with a higher expense ratio (~0.5% or higher for an index fund), I would avoid it.

Step 5: Decide on the type of account.

You need to determine the kind of account you would like to open. You can open a regular account, but as it starts to grow, you will owe taxes on your gains. As a result, I would recommend a Roth Individual Retirement Account (IRA) for most people.

If your Modified Adjusted Gross Income (MAGI) is under $139,000 this year as a single filer or under $206,000 if you are married and file jointly, you can contribute up to $6,000 a year if you’re under age 50 and up to $7,000 if over 50. This money isn’t tax deductible, but the gains aren’t taxed. When you withdraw the money, you won’t pay taxes on potentially huge gains.

Alternatively, you can open a regular IRA account (or if your workplace offers a 401k, you could take advantage of that). The advantage here is that the money you contribute is deductible from your taxes, but you have to pay taxes later on all withdrawals. Further, with both a regular and Roth IRA, there are penalties for withdrawing before you turn 59 and a half in most cases. That provides an incentive for leaving the money in and letting it grow.

If you want to have penalty-free access to your funds at all times and are willing to pay the taxes as you go, just opt for a regular account. If you want maximum wealth-building and think you can leave the funds alone until you are 59 and a half, then opt for one of the IRA accounts.

One size doesn’t fit all here. Explain your situation when you call, and they can potentially advise you on the right account for you. If you are able to save a lot of money, you may want to maximize a Roth or regular IRA first, and then put the rest into a regular account.

Step 6: Automate the investments.

There will be an option to fund this account with periodic automatic withdrawals from your checking or savings account. Once you figure out how much you can comfortably save, this is the option you want to choose. That way, once it’s all set up, you don’t have to do anything except keep putting money into your savings account.

Step 7: Grow wealthy.

This is self-explanatory. It will happen over time. The speed will be dictated by how much you can save, and the market performance in coming years.

The long-term annual average return of the S&P 500 is 9.8%, but there’s no guarantee that’s what you will get. Year-to-year returns can vary enormously. There may be years that the fund falls by 40% and years that it rises by 40%. But over time, there should be more winning years than losing years, and your wealth will grow.

Don’t pay attention to the returns in the short-term. Those annual ups and downs are noise. You don’t care about the annual return; you care about what happens over the long-term. If you can block out or just ignore that short-term noise, this is a winning strategy to wealth-building. However, if you tend to panic and sell when the market is tanking, you will find it much more difficult to build wealth over time.

Good luck. The younger you start the easier it is. A 20-year old needs to save only $165 a month under this strategy (and assuming the long-term average S&P 500 return) to accumulate a million dollars by the age of 60. Wait until you are 30, and that monthly savings rate jumps to $434 a month. But if you manage to save $434 a month from the age of 20, you will reach a million dollars by the age of 50.

It’s never too late to start. Saving something is better than saving nothing.

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