Secrets to Become Wealthy – The good news is that becoming wealthy on minimum wage is very much possible. There’s a common misconception that I’d like to debunk and it’s that building wealth is only possible with a high income. Having a higher income indeed makes things easier, but it only helps if the money is used optimally. If you watch the news, then you probably know a few wealthy individuals who declared bankruptcy because of poor spending habits.
Building wealth and riches has a lot to do with how much you can save and invest, and that’s why in today’s Practical Wisdom video, I’ll be talking about a few ways on how you can build wealth while earning minimum wage. First of all, building wealth is about making more than you consume and saving the difference. And although accumulating wealth on a low income is extremely difficult, it can be done with a few adjustments.
8 Secrets to Become Wealthy on Minimum Wage
1. Invest no matter how little.
Investing isn’t as easy, especially on a minimum wage. Even before you start thinking about investing there are so many expenses like utilities, food, housing, transport, and health, that you need to think about first. And these expenses tend to take quite a huge chunk of your earnings. With a low salary and a lot of it being taken up by basic needs, not much is left over for investing, but even a little bit helps.
When you put a certain amount of cash however small over a long period, it can eventually grow into a substantial amount. Investing works out so well in wealth creation because it relies on compound interest. This is when your interest is earning interest enlarging the amount of money you have in your account year after year.
And to invest your money you need to start setting some aside specifically for it. The amount you save for investing is entirely up to you but generally the more the better. This however doesn’t mean that you can’t do the same on a low income. Before placing money in just any investment, do some research and find out where you’d like to invest. Once you’ve made up your mind it’s always wise to track your investments because you might need to change what you’ve been investing in or put more money into it.
2. You should start early.
The sooner you start putting your money to work, the less you’ll have to save each month to reach your goals. A common trait among people is that we like to procrastinate. We constantly put things off like finding our dream job, saving for retirement, and certain lifestyle changes because we think we have all the time in the world.
But for a low-income earner, one of the most powerful assets for wealth building is time, and you must make the most out of the time you have. Don’t postpone things or spend aimlessly because you think you have months or years ahead of you to build wealth. And don’t make the mistake of thinking that you don’t earn enough money to save, or that retirement is too far away. Even the little you save adds up in the long run. So regardless of age or how much you earn, now is the time to start saving.
Waiting even a few months means a delay or significantly less money that goes into your financial goals. You may not earn a lot of money as you begin your career, but there’s one thing you have to your advantage and that’s time. With time on your side, saving becomes a more pleasant and exciting prospect.
3. Embrace frugality
People tend to misinterpret what frugality is but all it means is being intentional with your spending and how you manage your money. One of the main reasons why many people aren’t rich is not because they aren’t making enough but because they don’t know how to keep it.
Frugality helps you differentiate what your needs are from your wants are, so that you can avoid spending on unnecessary things. Aside from that, frugality is believed to be one of the fastest ways to achieve financial independence and even allows one to retire early.
When on a low income, you have to be diligent in the way you save money to grow your wealth but being frugal doesn’t mean your life has to be boring. Sadly this is how many people view it to be. You see, it’s possible to balance living a good life and saving money. And while earning a low income your path to riches may require you to be financially responsible but you can still have fun and enjoy life.
4. Cutting Expenses
Figuring out how to cut spending isn’t as easy as it sounds, as you may not even realize where you’re overspending, and breaking these long-term habits may not be easy. However, there are ways to reduce your outflow so you can devote more money to your goals and less to purchases that don’t improve your life or long-term financial situation. By reducing your outflow and directing more money to financial goals, you’ll be more successful in saving for big things so you can grow your net worth and build real wealth over time.
If your expenses are so high that you can’t save as much as you’d like, it might be time to cut back. Identify non-essentials that you can spend less on such as eating out and entertainment. You can also find ways to save on your fixed monthly expenses like cable and your phone use. You can save more by canceling subscriptions you no longer use, eating out less frequently, and giving yourself a grace period when you want to buy something instead of purchasing it immediately.
5. Get smart goals
Goals are beneficial for several reasons they set out a detailed path to your success and reduce any time wasted trying to achieve your financial goals. And another thing is they serve as motivation. One way of increasing your chances of achieving your goals is using the smart goal framework. This requires you to be specific, measurable, achievable, realistic, and timely. When you have a goal that satisfies these five elements you’re more likely to reach these goals. The idea of financial goal setting is to decide precisely what you want. Goals should be set and monitored or tracked closely because things can and do change. They can be long-term or short-term.
Setting short-term and long-term financial goals is an important step toward becoming financially secure. If you aren’t working toward anything specific, you’re likely to spend more than you should. You’ll then come up short when you need money for unexpected bills, not to mention when you want to retire.
Thinking ahead gives you a chance to work through things that could happen and do your best to prepare for them. This should be an ongoing process so you can shape your life and goals to fit the changes that will inevitably come. Annual financial planning allows you to formally review your goals, update them, and review your progress since the previous year. If you’ve never set goals before taking the opportunity to formulate them so you can stand on firm financial footing.
6. Create and stick to a budget
Everyone needs a budget, whether you’re earning millions or earning a moderate salary. As someone working on minimum wage, you’ll need to be even more calculated in your budgeting since you have less income and can’t afford to waste any. Budgets are beneficial because they allow you to track your progress towards the goals you’ve created. And aside from that, having a budget gives you a sense of financial control which reduces the stress one might have when trying to manage your money.
And lastly, placing your income and expenses into your budget gives you no choice but to remain cognizant of your financial situation which will lead you to make more financially sound decisions. Budgeting might sound like more trouble than it’s worth, but it can help you save more.
Having a budget is important because it opens your mind and you get to see exactly where your money is going. It becomes really easy to spend cash unless you have a plan for your money. You can even include your savings goals in your budget and meet them instead of aimlessly saving what’s leftover each month.
7. Eliminate high-interest debt
Aside from overspending, having to deal with debt payments every month becomes a huge hindrance when you’re trying to become wealthy on a low salary. Some of the interest you have to pay is reasonable such as the interest on your mortgage or student loans but other forms of interest can be avoided leaving you with the cash you can use to invest and ultimately grow your wealth.
The first thing to do is find the root cause of your debts and follow the necessary steps to eliminate them. Paying it off will lessen your stress levels and allow you to have money to put towards something worthwhile. When you’re trying to change your financial lifestyle think of all the money you can save when you stop paying high-interest fees.
Being in debt can be stressful. Having to worry over how you’re going to pay the bills and save at the same time. Stress over finances can make it even harder to save, budget, or simply write a shopping list that you can stick to. It’s important to dig your way out of debt as having more income freed up boosts your confidence and creates better opportunities for you to save for a better future.
8. Supplement your salary
Whether you want to save for retirement, pay off debt, or have extra spending cash, supplemental income can help you achieve your financial goals faster. Supplemental income refers to money that’s earned in addition to your regular income. As mentioned before, it’s possible to become rich on a minimum wage but it will take quite a significant amount of time. Luckily for those who aren’t so patient, there’re ways to speed up the process, one of them is having more than one stream of income.
Additional income can be earned from your employer through bonuses, overtime, back pay, and commission. Although supplemental income usually comes from finding easy ways to make extra cash outside your regular job. This could take any form such as doing freelance work, getting a part-time job, or starting your own business.
Funds from these streams of income can help you pay off your debts and expenses ultimately increasing your income and shortening the time it’ll take for you to reach your financial goals.
There are plenty of ways to earn cash on the side no matter your skills or background. Regardless of the route, you choose you can give your budget a healthy buffer and improve your financial standing much faster. That’s it for today, and I hope these tips help you out.