There is a tendency to associate “richness” with “size of income”. However, there is not always a direct correlation between wealth and salary. For example, someone who earns an annual salary of $100,000 might conceivably live a very expensive lifestyle and may have needed to take out a huge mortgage to be able to afford their mansion in the most expensive part of town. In contrast, someone on $30,000 might be very good at managing their costs and investing their money and may therefore be a lot better off. However, it is true that, all things being equal, it is clearly easier to amass wealth if you have a high starting salary. Those on a meager salary are therefore required to work a little harder to build up their nest egg.
There is a frequently quoted phrase in financial planning that states that it is usually easier to reduce your costs than it is to increase your income. It therefore makes great sense to start one’s quest for financial well-being by reviewing current spending patterns and seeking to slash monthly costs.
Budgeting is the process that financially savvy people employ in order to ensure that they are minimizing costs. The process starts by reviewing previous months’ spending to see how much you are spending and what categories of things the money is being spent on. This, in turn, then enables the person to identify extravagant costs that can quickly be eliminated and other costs that can be pruned.
As an example, a cost that might be capable of being eliminated might include an expensive gym membership if you are not making use of it. Examples of costs that may be capable of being pruned include things such as the weekly cost of groceries, or the amount you are paying for bills covering such things as gas, electricity, telephone, and Internet.
Live within your means:
Reviewing your spending will identify one key aspect of your financial equation, namely how much you are spending. The other key aspect is what your current income is. Clearly, then, in order to generate any wealth your monthly income must exceed your monthly costs. The budget objectives that you introduce must therefore include the commitment to spend less than you earn, and to maximize the amount of disposable income that is left over at the end of every month.
Invest your surplus money prudently:
Getting rich will normally require a person to place their surplus money into savings accounts and investment instruments that will hopefully deliver a good return on investment. Not all savings and investment products perform equally well however, so the choices made when investing will determine how much of an uplift you generate on your money. With savings accounts, the basic principles are that you should look to take advantage of any tax-free allowances and to get the highest possible rate of interest. With investments, you will need to weigh up your attitude towards risk against your desire to generate a high return.
Being proactive in researching options and reading up on financial options can help an individual to avoid some of the pitfalls and hopefully generate an above average return. It’s important to note as well that many people may benefit from taking into consideration the advice of financial professionals, especially in relation to the fairly complex world of investments.
Always seek opportunities to boost your income:
Clearly, any additional income that can be generated will assist in a strategy to become rich. This could involve seeking a promotion, volunteering to work overtime, or taking on a second part-time job. Or it could involve writing for a paying website such as Helium!
Additionally, make sure you claim on any state income that you are entitled to. For example, if you have children you may be entitled to child tax credits and child benefit payments. Those based in the UK can check their eligibility for benefits payments by checking out the moneySavingExpert website benefits calculator.
Be the tortoise, not the hare:
For those who remember their children’s stories, the tortoise was laughed at when he chose to race against the hare. However, by steadily making progress the tortoise won the race whilst his longer legged competitor took a snooze. Getting rich on a meager income requires a get rich slow mentality but those who are meticulous in their pursuit of greater wealth can reach their end goal. The key is to consistently apply prudent financial management strategies, so that your money works hard for you and so that you can maximize the amount of surplus money that you can invest.