Build Wealth On Any Salary

By Bizclik Editor

Written by: Steve Repak

There are no secrets or short cuts to wealth building.  If there was, don't you think they would be selling it on an infomercial for the low, low price of $19.95?  Most people think that their next raise, refund check or an unexpected financial windfall will magically transform their finances.  The truth is, it's not how much money you make but how you THINK about money that determines your ability to build wealth successfully.  Many people don't think about money, they just spend it.  Follow these four steps and start thinking about your money:

1. Spend Less Money Than You Make

People that are able to build wealth are able to spend less money than they make.  The great part is that it doesn’t matter what you earn as long as you are spending less. If you earn $20k a year but only spend $18k you are better off than someone who earns $200k and spends $205k.  To accumulate wealth you need to know where your money is going.

Tip: You can do this by keeping a spending diary.  Start keeping receipts any time you spend money and record all of your expenditures in your diary at the end of the day.  There are also a variety of smart phone applications that will help you track your expenses on the go.  Once you know where it goes, you can start determining where to cut. The key to having more money is simply spending less of it.

2. Do Not Allow Your Emotions To Influence Your Financial Decision
When you spend money, your brain releases endorphins to the pleasure receptors in your brain.  Have you ever heard of a runner’s high?  The same principle is in action when you make purchases. For example, when people buy a new car they really like that new car smell.  The bad part is that after a few months that new car smell starts to fade and you are left with 56 months of car payments.   Those short term emotions will derail your long term success.  To increase your wealth you need to resist that short term high you get from buying things and keep your eye on the long term prize which is financial security now and a comfortable retirement later.  
Tip: To keep from making an emotional decision on a purchase, try asking yourself "if I lost my job tomorrow, would I need ________(fill in the blank)?"



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3. Save

Your credit card company doesn’t love you. Neither does the electric company, your favorite department store or the car sitting in your driveway. Nobody loves you more than you do, so why aren’t you paying yourself before you pay anybody else?  Your goal is to pay yourself at least 10% of what you make.  Do not get hung up on whether this should be before taxes or after...pick one. Take your weekly salary and drop off the last number; this is how much you will pay into your "I love me" account.  For example, if you take home $750 a week you will drop the 0 and now you know that you should be saving at least $75.  

Tip: Once you have your number, set it up as an automatic bill payment just like you do with your other bills. Always make sure to pay yourself first!

4. Reduce Your Debt

People that are able to build wealth have little or no debt.  Yes, believe it or not there are folks out there with NO debt!  If you do have debt, the first step to reducing it is to stop charging.  If those cards are burning a hole in your wallet, put them in a bowl of water and stick 'em in your freezer. Now if you get tempted to use your cards, you will have to wait until they thaw out.  Next you will develop a "get out of debt" plan.  

Tip: A great website to help you with this is  Keep in mind that just as you didn’t get INTO debt over night, neither will you get OUT of debt overnight.  The key is to quit charging and put together a plan.

There's an old saying that "don't do today what you can put off until tomorrow".  The problem with that is tomorrow is right around the corner and if you don't start changing the way you think about money you will find yourself broke and with few choices. There are no secrets or shortcuts to building wealth; the key revolves around priorities and planning.  Where you spend your money is a sure way of identifying your priorities. Your spending diary will help you uncover yours.  The next step is to plan, plan, plan.  Plan to spend (wisely of course), plan to save, plan to make rational decisions with your money, and finally, plan to reduce your debt. Your financial situation will not get better by itself, but if you take these steps it WILL get better.
Steve Repak is a certified financial planner, Army veteran, motivational speaker, consultant and author of Dollars & Uncommon Sense: Basic Training For Your Money.


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