While earning more money should theoretically help in building wealth, it's important to remember that wealth building requires us to save money and let that money grow. After all, you could earn a million dollars but if you spend a million too, your net worth stays at zero. This turns into a money managing opportunity rather than a problem of "not earning enough."
Somewhere in my journey of trying to increase my own financial literacy, I came across the analogy of managing money as similar to lifting weights. I can't remember where that came from exactly (otherwise I would've referenced it here) but essentially, in order to be able to deadlift your own body weight or more, you have to have proper form. You learn and practice this proper form with smaller weights first before moving on with heavier weights. Otherwise, you risk injury.
It's the same with money. If you wish to have a lot of wealth one day, the best thing you can do right now is to learn how to manage whatever money you have currently. Otherwise, lifestyle inflation could kick in without you even realizing or you might let emotions guide your financial decisions.
In future posts, I plan to write about the topic of making money work for you and grow but for now, I'm sharing the FIVE things I'm doing and plan to continue on doing in order to increase my wealth without having to increase my income:
Give myself a pay cut. No, this doesn't mean I'm going up to my employer tomorrow to ask for a pay cut. It means I'm going to pretend I earn less, by having an automatic transfer from my chequing account into my savings account every payday. While experts may suggest 10%, you can decide for yourself what % is reasonable given your current situation. The key is actually setting money aside before you create your budget.
Create a budget. This will allow me to see where my money is going. When I see where my money goes, I become more mindful with my spending. And less spending means more saving! The more difficult part and the key to success is actually sticking with the budget.
Pay down debt. When debt goes down, net worth goes up.
Live below my means. This is the attitude and the lifestyle I'm aiming for. While it's closely related to sticking with the budget, I think the meaning extends further. It requires me to continually reassess my budget and my priorities. It gets me out of the mentality that "because I can afford it, it's okay." I cannot tell you how many online purchases I made from Banana Republic, Sephora, etc. "since I can afford it anyway." I've been pretty good at living within my means but I want to challenge myself to live BELOW my means and save that extra money.
Find other ways to save. There are tons of ideas out there. The ones that worked for me include:
living at home while not living the married life (my parents love that I'm home and I love spending time with them so it's a win-win for us)
phoning my auto insurance before my policy anniversary to request for a better deal (I saved almost $300)
using coupons and cashback opportunities (I especially love our local gas station coupons because it really saves me a lot since I drive often to work),
buying generic products (from a pharmacist's point of view, in most cases your body will not know the difference between a generic drug vs. brand name)
buying low cost investments (ie. ETFs)
How do you plan to increase your wealth without increasing your income?
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