Building your wealth doesn’t depend on the size of your income, although the higher it is the better, but on how you manage the resources you have. You can earn a hefty pay check every month but without proper financial management and investing it, you won’t be able to grow your wealth for a secure financial future.
With wanton spending, you will be living pay check to pay check and should you suffer a loss of the regular income stream, you will find yourself leaving in squalor within a short time.
To create and grow your wealth, you must be willing to save in order to invest and manage your money better, no matter how little it is.
Have several streams of income
You cannot depend on a single stream of income if you want financial security. Having a single pay check exposes you to financial struggles should you lose it for one reason or another.
You need to have multiple streams of income in order to have more money to save and invest for your financial goals. You reach your financial goals faster when you have more money to put into your investment ideas.
You can find a suitable side hustle that doesn’t interfere with your main job to earn you a passive income to supplement your regular pay check. In this case, you have a fall back plan should you lose one source of income.
Live below your means
You won’t have any money to invest if you spend all your income. It becomes even worse if you spend more than you earn since you will get stuck in an endless cycle of debt. Debt repayment will usurp the money you could have otherwise saved and invested.
This is true regardless of how much money you earn. You could be earning $100K a year but you wouldn’t build any wealth if you spend the whole of it without saving.
To create more money for your investment goals, learn frugal habits from Warren Buffet who is a billionaire but lives below his means. You need a budget for this.
You need to pay yourself first when you get your pay check arrives. Paying yourself means saving first before you spend your income; not saving what’s left of your income after expenses.
The 50-20-30 rule is a general guidance on how to spend your after-tax income. Not more than half of your income should go towards essential living expenses like rent, food, utilities and debt repayment. Only a maximum of 30% should go towards your lifestyle expenses like eating out, traveling, and non-essential shopping. A minimum of 20% of your income should go towards your savings.
Now, using creative means from Access 2 Knowledge you can reduce your expenses on other budget items to free more money for savings account.
The best way to prioritize your savings is to make arrangements with your bank so the amount meant for your savings account is automatically deducted when your pay check arrives.