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Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions.
This week’s episode starts with a discussion of the upcoming tax filing deadline. If you’re not ready to file your tax return, you can get an extension until Oct. 15 — but you’re still expected to pay what you owe on July 15. If you can’t pay, the IRS has that allow you to spread out the bill. If you need help from a human at the IRS, prepare for a wait. The agency faces a massive backlog from COVID-19 shutdowns and taxpayer services are limited. The main hotline (800-829-1040) is once again taking calls, but there are also such as problems with a stimulus payment or checking the status of a refund.
Then, we pivot to this week’s question from Eva. She says, "Hey Nerds, I'm a first-generation professional interested in building wealth. What investment strategies or education would you recommend that my parents did not teach me? Wealth creation is not something my parents practiced."
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Having parents who created wealth, and who can teach you how, is a huge leg up. But you can begin to build wealth on your own with some simple (but not always easy) steps.
The first step is spending less than you earn. That can be incredibly difficult with a lower income or in an expensive area. A budget can help you identify areas where you can. We like the because it helps balance needs (50% of your after-tax income), wants (30%) and savings and extra debt payments (20%).
The next step is to make saving and investing automatic. If possible, set up regular transfers from a checking account to a savings account. Sign up for a workplace retirement plan, such as a 401(k). If you don’t have a retirement plan at work, you can open an individual retirement account or Roth IRA. You can set up automatic transfers from your checking account.
You don’t have to save huge amounts of money to start. Even small contributions add up over time. The most important thing is to get started now and to keep going.
Give yourself some breathing room. Building wealth can start once you spend less than you earn.
Every little bit helps. Putting aside even a few dollars a week can help you get in the habit of saving, with the money adding up over time.
Make it automatic. We’re more likely to save and invest if we don’t have to think about it. If possible, set up automatic transfers or sign up for workplace retirement programs such as a 401(k).
More about building wealth on NerdWallet:
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