“The gratification of wealth is not found in mere possession or in lavish expenditure, but in its wise application.”
-Miguel de Cervantes
$24,000 a year or $24,000 a month are two very different salaries, but you can still build wealth using the same tactics and implementing the same philosophies. We’re here to refresh your memory on the most important rule of building wealth...
It may seem like the most obvious idea, yet it’s rarely carried out in life: Living within your means. You might think you already are, but as we go, you’ll discover you’re cutting it too close.
If you’re making a lot of money, you also might be spending a lot of it, too. Fast cars and expensive watches are not the goals of wealth builders. If anything, they are a hindrance, especially in the beginning.
Rich people spend their money on tangible novelties of perceived status. Wealthy people use their money to increase their income. Rich people get their first payday and it’s off to the Ferrari dealership. They continue to put their nose to the grindstone working endless hours to buy the newer, faster Ferrari. Wealthy people will take that “Ferrari money” and, instead, invest it in another stream of income.
Wealthy people will make their money work for them instead of working for their money.
This all starts with knowing how to spend your money and when not to spend your money. We’ve talked about finding your net worth in a previous blog. Let’s expand on that and change the way you think about your current wealth. The best way to start is to create a budget.
A net worth will give you a broad idea of how much you’re bringing in, but a budget will shine a laser focus on how much at the end of the month you’ll have to work for you. You may not realize it, but you’re probably spending that leftover amount in ways that are dismantling your wealth instead of building it.
To have a better idea of what your budget should be: Take a look at your current income vs. spending habits. Within those spending habits, figure out how much you spend on needs vs. wants. Make a list with 3 columns: 1. How much you bring in every month 2. How much you spend on essential items. 3. How much you spend on nonessential items. Subtract column 2 and 3 from column 1 and you have your leftover amount.
Needs are essential
Wants are nonessential
Movie Theater purchases
Cable, Streaming and other internet or mail-in Subscriptions
Those nonessentials start to rack up, don’t they? No matter what your current leftover amount is, it can be vastly improved. The next step is to change your habits to reduce how much you spend within your nonessential and essential items lists.
In the next blog, we’ll give you some amazing ideas you can implement right away to make that leftover amount build to amounts that will start working for you instead of the other way around.