Ways you can Build Wealth When you earn a Small Income.
Wealth is something that takes time to build or accumulate. With that being said, you will need some patience and diligence to build wealth.
According to Investopedia, building wealth is all about making money, saving money and investing money.
Wealth is mostly associated with people who are rich, people who earn big salaries, or earn a lot from their businesses.
You might be there and wondering how you can build wealth when your salary is small and your needs are more than your income. Well, the good news is, anyone – those with high incomes and low incomes- can build wealth. What matters is how you manage what comes in and what goes out to your expenses, savings, and investments.
Those little things that you do when it comes to money are what make a difference. A difference between a person with financial freedom over time and someone who is constantly financially stressed.
As they say, little by little goes a long way and these simple ways will help you build wealth even when you earn a small income.
1.Change your perspective about money and wealth
This is the first thing you need to work on in order to start your journey to building wealth.
Where you are now financially is highly about your relationship with money, how you see money and how you see wealth.
For example, maybe you have made yourself believe you cannot save money or you cannot invest because you earn a small salary. Or feel like you are just an average individual who doesn’t deserve to be rich or to be wealthy.
In the book, “How Rich People Think” by Steve Siebold, wealthy individuals believe that success, fulfillment, and happiness are the natural order of existence. On the other hand, average earners stay average simply because they expect to. Steve Siebold says the masses think they are not worthy of wealth and ask, ‘Who am I to become a Millionaire’.
In order to build wealth, you have to change some of the ‘false truths’ you tell yourself about money and wealth.
2.Come up with specific money goals
Coming up with specific money goals helps you see and understand where you want to be financially. As you come up with these goals, you will come up with ways to get there.
These goals will help you be more cautious about how you spend and plan your money.
They will motivate you to work hard to achieving them and being more serious about money.
Be in control of what you want your money to do for you. Where do you want your money to take you? Having that picture will motivate you to develop good money habits
Financial experts suggest having specific and time-bound goals e.g. a 5-year plan or 2-year plan. In this 5 or 2 year plan, have specific money goals you want to achieve within that time and how you will achieve them.
For example, saving 2 months’ income 3 times a year for emergency savings or setting apart 5% of your income every month to pay off your debts for the next 1 year.
When you save for the sake of saving, you might end up using those savings for anything that is not even important or necessary. But, having such specific goals in mind will help you save knowing what you are saving for is important to you.
Let wealth be your main goal, dream big, and don’t be afraid to challenge yourself.
3.Live below your means
This is going to have a real impact when it comes to your spending and savings.
You are probably living paycheck to paycheck and when you are spending every dime you get, forget about building wealth.
You need to drop your living expenses as much as you can in order to have some money left to go into your savings or invest to build wealth.
Make sure you spend less than you earn no matter what. If that means cutting down how much you spend on rent, food, or transport, do that. Another way to do it is by choosing cheaper alternatives when it comes to housing, food, transport, etc.
Reduce how much money you spend and cut down spending on things you don’t need. Look at the things that ‘waste’ your money and stop wasting money on them.
If it comes to a point where your income increases, don’t fall prey to lifestyle inflation – the need to increase your spending as your income increases. Consider keeping your spending levels leveled for a good period of time.
With the extra money remaining, you are able to have money to pay off your debts, to start investing, to save, and to build wealth.
4.Work hard and make more money
The fact that your income is small or feels small, you should look for ways to make more money.
It’s time to work as hard as you can and maximize your personal income. When you maximize your income, you maximize your savings and your investment abilities.
Trent Hamm, Founder of Simple Dollar writes that with more money you have more resources to not only live on but also build wealth and become rich.
There are so many ways to make more money and you just need to figure out which works for you. You can consider moving up the career ladder by giving your job your all.
Additionally, consider ways to make passive income or start a side business or get a part-time job.
Remember to keep your spending levels leveled or even as you start making more money. The aim is to have more to save, invest, and to build wealth.
5.Know the money coming in and the money going out
This will help you manage and balance your finances.
How much do you get, when do you get it, and how do you spend it? Answering these questions will give you a clear picture of what you have and what you can put aside for your financial goals.
Financial experts say that most people usually don’t track their income and spending and advice individuals to become their own financial officers.
Tracking your spending will help you notice where you are overspending and what you can do without.
With technology, you don’t have to stress about tracking your income and spending. There are so many free apps you can use to budget, set money goals, track your expenses, and save.
When you become more aware of your expenses, you will be more in control of your spending and your journey to building wealth.
6.Save your unexpected cash
A few times here and there, you are likely to get cash you didn’t expect or see coming.
It can be a bonus at work, money from your birthday or anniversary celebration. It can also be the 10 dollars you find in your jean’s pocket you didn’t know existed.
Develop the habit of saving unexpected cash instead of using it. Direct this money to your money goals such as a debt, emergency savings account, etc. With time, this money will add up to something important other than being spent on something you don’t need.
This habit will come to pay when you start earning more either from a salary raise or from your extra sources of income.
7.Ditch the small daily expenses
Remember, the little things that seem not to hurt actually hurt your finances over time.
Those small purchases you make regularly add up and can help you save some money. If you calculated these purchases and added them up at the end of the week or month, you will notice it’s a good amount that can be put somewhere else.
The spare change you get after shopping or fueling your car, save it. How much money do you think you would have saved at the end of the year? What about after 10 years? That‘s a lot of money.
So, ditch the frequent morning coffees at the coffee shop or the regular candy and chocolate you get with your spare change.
8.Stay out of bad debt
Financial experts say that everyone has debt at some point in their life.
Bill Fay on Debt.org talks about 2 types of debt, bad and good debt. Good debt is debt that increases your net worth, for example, a mortgage loan, a student loan, or a small business loan.
On the other hand, bad debt does not increase your net worth and you actually don’t have the money to pay for it.
Simply, bad debt is money you borrowed to purchase goods or pay for services that do not have a lasting value. E.g. payday loans, automobile loans, and credit card debt.
If you want to build wealth, avoid taking bad debt, and make sure you pay your good debt on time too.
9.Invest in yourself
Your journey to building wealth depends on you as an individual as you make the choices by yourself.
Being the goal bearer and your own chief financial officer, consider investing in yourself.
Expand your knowledge as much as you can beyond the basic knowledge or the college degree you have.
Read books on personal finance, and look for books recommended by wealthy and successful people such as Bill Gates, etc.
Consider furthering your career knowledge to increase your income level. Get designated certifications in your industry or even save up to do several short courses.
Conclusion
Thomas C. Corley writes in “Change Your Habits, Change Your Life”, “Habits are the cause of wealth, poverty, happiness, sadness, stress, good relationships, bad relationships, good health, or bad health.”
Hard work, saving diligently, and living below your means is your key to building wealth regardless of what you earn.
