According to financial planner Anthony Carlton, saving and investing to build wealth for retirement have little to do with your job title.  He published an Op-ed in Business Insider. He explains that some of the wealthiest people he knows are teachers, college dropouts, and other professionals in non glamorous jobs who live modest lives. But if you saw their portfolio or bank accounts, you would be quite surprised.    

He wants to dispel the myth that in order to be rich you need to become a lawyer, doctor, or executive, when in reality, many of those types actually spend their money frivolously, often getting into debt playing the comparison (keeping up with the Joneses) game with peers. 

So is there a formula or secret to building wealth for safety net or retirement? 

According to Mr Carlton, most of his richest clients share these 5 money making habits and disciplines.    

1 They build the discipline to invest each month without fail

(image credit: The ways to wealth)

You can’t build real wealth without investing, affluent people understand this well, which is why they use their income to buy appreciating assets such as stocks, equities and real estate.  

Successful people also know it’s not about timing the market, which is the reason why you need to have longer investing time horizons such as decade or more to build a retirement nest-egg.  He explains that his richest clients “know that investing is about spending a lot of time in the market.” And instead of trying to time the markets’ random highs and lows at the perfect time, they simply invest the same dollar amount on a set schedule. Just like clockwork.  

And by building the act of investing in a habit, (using financial tools such as automatic transfers each month), he stated that his clients avoid costly mistakes, like missing the best-performing days in the stock market and losing out on years of compounded returns. One of the smart investing strategies they take advantage of is called dollar-cost-averaging, and it’s something anyone can do.   

2 They set clear financial goals   

Mr Carlton explains that our mind’s can be a powerful tool.  And when someone gets clear about what they want, when they want it, and has a strong conviction “why’ behind their goal – it can become totally motivating to go after it.  Once the goal is clear, then someone can optimize their actions around achieving them. 

For many financially successful investors, the goal is just a starting point. After deciding what they want they set up repeatable systems that align their actions with their goals. This is what drives real progress.  

Mr Carlton, stated in his article that the next time you set a financial goal, such as saving up $50,000 for home down payment, you need to set up weekly or monthly actions that will be necessary to reach your goal. In this case, it could be a monthly transfer of $1,000 into a high-yield savings account you’ve labeled “Future Home Purchase.”   

3 They prepare for the bad times

Saving and building up wealth is one thing, holding on to it or not losing it is an entirely other subject. Smart investors prepare for those unexpected bad times. It could be an unanticipated medical emergency, market crash, taking sparky to the vet, or replacing some part of your home such as the roof— regardless what the hazard is, there are ways to shield yourself from financial ruin. 

Mr Carlton, outlines some of his client’s favorite strategies to weather financial storms: 

• Researching and choosing the right health insurance plan 
• Having a cash emergency fund equal to six months of income
• Protecting their income with disability insurance
• Protecting their family with life insurance
• Protecting their legacy with an estate plan

Without the “protection” part of your plan, it’s all too easy to blow up your financial goals when an inevitable surprise comes along.

4 They diversify their income  

Diversification of not only your investment portfolio but also income sources is a smart thing to do.  So if you only have one source of income coming in, such as wages, bonuses or salary from your main employer, then that puts a lot of pressure on your ability to maintain that income to fund your retirement future. If you were to get sick or fired then you go from boom to bust potentially. 

Now wealthy investors understand this concept well, and if they happen to lose one stream of income because of a surprise event like an economic recession, they have four or five others to help them pay the bills, continue saving for retirement, and avoid going backwards with their goals.

Mr Carlton, points out that some of the most common additional income streams that many smart financially savvy people use are: 

• Owning income-producing assets like stocks, bonds, and real estate
• Turning their expertise into a consulting or coaching business
• Building a scalable side hustle through writing, e-books, and courses
• Leveraging their network to find great businesses to invest in    

5 They seek help from professional advisors   

Mr Carlton’s final piece of financial advice comes to knowing when it’s a good idea to consult with professionals for help or get another perspective.  He explains that when his client’s need help, or simply lack the time to do something themselves, they invest in professional advice. This rings especially true for their personal finances. 

Smart people do not try to DIY everything, especially when it comes to important things such as investing, taxes, insurance, and major financial decisions, they understand the value of partnering with a financial advisor to put all the pieces in place.