LYNCHBURG, Va. (WDBJ7) In the same way many of us can't leave home without a map or directions from a mobile device, experts say you can't start building wealth until you know where you're going.
"You really need to have a plan," said Josh Stamm, president of Legacy Wealth Management in Campbell County.
So where do you start? For many of us, it might be as simple as taking a trip to the nearest bank.
"You want to develop an emergency fund," explained Doug Jones with Colonial River Wealth Management. He says we should put away enough money to cover daily expenses for an extended period of time, in case something comes up like a medical emergency or job loss that takes away income.
"About six months worth of savings in the bank," Jones said. "From there you can start planning out an investment strategy."
"If I have $3,000 worth of bills coming in every month, I probably should have somewhere between $9,000 and $18,000 in reserves," said Stamm. "To be fiscally responsible, a great thing is to build a cash reserve before doing anything else."
Stamm says before you can invest, you have to make sure there's money available to spend. That means paying off credit cards and car loans.
"I would recommend getting those things squared away first before you start saying 'hey, I'm ready to save'," Stamm said.
When it comes to saving, Jones recommends putting money into a Roth Individual Retirement Account, or IRA.
"You can put the money in after tax and in retirement you can take it out tax free," said Jones.
This year you can put more money into a Roth. The annual limit has been raised from $5,500 to $6,000. $7,000 if you're 50 or older.
"It's a good way to start and you're not tied to a certain amount of money each year," said Jones.
When it comes to investing in the new year, how should we view the stock market, especially after the wide swings we've seen in the last few months?
"Clients are very concerned right now," said Jones. "We haven't seen this kind of market volatility in over two years."
"(In the) short term, certainly there is going to be volatility, but we (investors) take the long view," said Stamm
Experts say you're have to stay focused on your goal. The market may be down right now, but it won't necessarily stay that way.
"There are many years where the market has gone down, and the market has been positive as well. If you look at the history of the market, it's up 75% of the time," said Jones.
For those who might be fearful of stocks trending down, Jones says interest rates are headed up and that could be an investment opportunity.
"Interest rates have gone down for the past 30 years and now they're starting to go up," Jones said. "As interest rates rise, you've got to play that into your financial plan as well."
Higher interest rates could yield money in places like bonds, and certificates of deposit, or CD's, at banks and credit unions.
Overall, experts say you have to view saving the same way a runner prepares for a race.
"Saving and investing is a marathon. It's a long-term proposition and wealth is built over long periods of time," said Stamm.
And as the old saying goes, slow and steady wins the race.