How To Become Rich Even With A Low Income

 

How To Become Rich Even With A Low Income

You’re already well into your career and you haven’t hit it big with any job opportunities yet. You’re not the CEO of a company, you haven’t invented anything that will make you millions, and none of these things seem to be feasibly in your future.

 

Luckily, fancy job titles are not necessarily what makes people rich—though they certainly do work for some people (think Bill Gates). We can’t all be Bill Gates or Donald Trump, but does your lack of a company of your own mean a lack of wealth? Certainly not! It is possible to build wealth without a huge income, it just takes a little more planning and organization.

The key to building wealth is to keep track of your net worth. Your net worth is different from your income because it includes your assets and debts as well. In order to build wealth you should be increasing your assets—an investment in a home or a car would be an example of this—while simultaneously decreasing your debts.

So how can you do this and get yourself on the right track for building wealth?

Plan how you’ll spend your discretionary income

Discretionary income is a great, but difficult, thing. When you have a job and start making a lot of money, it’s easy to start spending that money on the things that you want but that you don’t really need. Trust me, I know. What’s the first thing that you want to do when you get a pay raise at work? Start planning your European vacation of course! But if you want to start building wealth you need to do more proactive planning with your discretionary income.

Spending money on things like vacations or brand name clothes won’t increase your wealth, unfortunately. So, if you’re looking to build actual wealth you’ll need to start spending your discretionary income on either paying down debts or investing in assets—ideally both!

Before your paycheck even comes you need to budget yourself. In fact, stop thinking of this income as “discretionary” and start thinking of it in terms of building your wealth. If necessary, allot yourself a budget for some things that you want, but don’t need, but put away most of that money for building your wealth.

This process is going to take some time, but down the line you’ll be more thankful that you’ve built so much wealth than if you had bought new clothes every month. Clothes are not wealth. Money is wealth. Don’t forget it.

Start building your wealth as soon as possible

The quicker you can start saving the better, because of compounding interest. One benefit of compounding interest is that  you’ll need to invest less money per month to achieve your savings target. Compounding interest simply means that the money you earn as interest also earns interest. If you start putting away only $200 per month today and can put that much money away every month for 50 years with 7% returns, you’ll have almost $1 million dollars by the end of the 50 years!

Just think, all you’ll have to do is stop spending so much money on beer and shoes, and you can definitely spring that $200 a month. See how much it pays off to be cautious with your discretionary income?

Get a financial advisor

Whether you are building wealth on a low income or you‘re already a millionaire looking to protect your wealth, you need to get a financial advisor. Your job is to make money, but it’s not necessarily your job to know what you should best do with that money. Make sure you’re comfortable with your financial advisor, and don’t feel bad about changing if necessary!

A good financial advisor should be able to help you with savings goals as well as investments. Make sure that they are certified by the Certified Financial Planner Board of Standards, which will ensure that your advisor is up-to-date and practicing ethical money handling.

Saving money can be tricky, but it’s worth sacrificing your unnecessary expenses. Down the line, the payoff to saving early by putting away your discretionary income is huge. Get help with your finances and you’ll be setting yourself up for success by the time you retire!