Building wealth might seem challenging, but it could be easier than you think. Suze Orman, famed bestselling author and personal finance expert, shared her No. 1 tip for building wealth with Jaime Catmull on “The Richer Way,” a GOBankingRates podcast.
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Keep reading to learn Orman’s No. 1 tip for building wealth and the strategies she recommends.
According to Orman, her top tip for building wealth is simple. “It’s a very easy one, which is to spend less and earn more,” she said. “To really, really look at what you have coming in versus what you have going out.”
She said you should absolutely be saving at least a little bit of money each month, especially if you’re younger, as this offers a variety of benefits and helps build wealth.
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As part of her top tip for building wealth, Orman advised thinking about where your money is being held. “Take advantage of compounding … take advantage of a Roth retirement account over a traditional retirement account, no matter what tax bracket you happen to be in,” she said.
She emphasized the importance of choosing a Roth retirement account. “If you really want to not just build wealth, not just build wealth, but keep the wealth that you build, one of the biggest mistakes you will make is if you opt for a retirement account that gives you a tax write-off versus a retirement account such as a Roth that allows you to invest with after-tax dollars,” she said.
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She explained it’s important to really think about the amount of money you’ll gain by opting for a Roth account.
“If you can’t understand that and you don’t believe what I’m saying to you, go to the ‘Women & Money’ podcast, my podcast, listen to the April 21st podcast,” she said. “And I’m here to tell you, after you listen to that podcast, you will never put money in a pretax retirement account again, no matter how wealthy you are, the tax bracket you’re in, no matter anything, you’re not going to do it.”
If you’re new to retirement savings, you might not understand the difference between a Roth IRA and a traditional IRA — and that’s okay.
A Roth IRA allows you to contribute after-tax dollars. There are no current-year tax benefits, but you’re able to withdraw the funds after age 59 1/2 without penalties or taxes, as long as the account has been open for at least five years. On the other hand, a traditional IRA allows you to make pretax contributions, which can offer immediate tax benefits. However, you’ll have to pay taxes on the funds as you withdraw them in retirement.
