How to Build Wealth on a Low Income

introduction

Many people think that only those with large incomes build wealth and that you have to have a high-paying job, have wealthy parents who give you money or support you financially, and/or have a huge salary to build wealth. The truth is that your wealth is built by the way you live your life, your habits, your discipline, your approach to your financial future, and the way you think about your finances for the long-term. Even if you do not make a lot of money, you can begin building wealth over time as long as you have the right mindset, attitude, and discipline.

This is a guide to show you how to build wealth, even if (when) you don’t make much.

1. Changing Your View of Wealth

True wealth is more than just money in the bank! Wealth means:

Being in control of your money

Being free from the stress of constant financial distress

Being able to respond effectively to an emergency

Having an asset base that grows over time.

When you change your view of wealth from “getting rich quickly” to “finding financial security over time”, you will make better financial decisions.

2. Tracking Every Dollar You Earn and Spend

If you make a lower income, every dollar counts.

You can begin by:

Writing down the income sources for every dollar of income you earn;

Tracking every expense, including all small expenses;

Organizing your spending into categories, such as food, rent, transportation, entertainment, etc.

By tracking your income and expenses, you can see where your money is leaking out. For most people, when they start tracking their expenses, they really begin to understand the amount they are spending on daily purchases that they never realized they spent as much on as they actually do. Once to understand where you are spending your money, you can start making better decisions about how to spend your money.

3. Develop a Basic, Attainable Spending Plan

Developing a spending plan (budget) is not about being restricted; it is about getting organized.

Your basic plan:

Need: Rent, food, utilities, transportation

Want: Save assisted: small amounts (even $5–$20).

4. To spend: Hobbies and fun

If you have a hard time saving, contribute a small amount (but do it consistently). A $5–$20 contribution per week adds up over time and helps establish a habit. The habit is more important than the amount.

As a person just starting out, an initial goal for a savings fund would be anywhere from $500–$1,000; your savings should eventually grow to cover at least three to six months of living expenses. You can place your savings into an account that is easy to access and secure, so that you can use it when necessary.

5. Get Out of Debt or Avoid Getting Into Debt

The number one hindrance to building wealth is debt—especially when it comes from credit card and payday loan interest. Rather than accumulating more debt while trying to build wealth, it is best to focus on eliminating credit card and payday loan debt. The next recommendation would be to avoid making lifestyle changes unless you can afford them.

Also, say ‘No’ to things that require excess amounts of financing.

Then, for anyone with multiple types of debt, you could use one of two methods for paying off debts: The Snowball Method (where you pay your smallest debt first), or the Avalanche Method (where you pay off your debts with the highest interest first). Most people find that either method works for them; it really comes down to sticking with one of the methods.

6. Strategically Increase Your Income

Increasing your income will help you build wealth, but you do not need to put in more than 40 hours a week at one job to do so. Here are several smart ways to increase your income:

Develop a high-demand skill set (writing, graphic design, computer programming, bookkeeping or accounting, and/or digital marketing) to become self-employed.

Take additional hours at your current job (when possible).

Start your own part-time or side job.

After you have proved your value at work, request a raise.

If you save and invest your additional income wisely, it can greatly affect your future financial standing.

7. Invest Early and Small

You do not need to have a large sum of money in order to begin investing.

Your options include:

Index Funds and ETFs

Retirement Accounts

Micro-Investing Applications

Time is the most significant factor when it comes to investing. Compound interest means that small amounts invested regularly will add up to large sums after many years.

As an example, if you invest $50 monthly, that small investment could amount to tens of thousands of dollars after several decades.

8. You Should Live With Your Own Preference of Dignity Not Below That

Living below your means has nothing to do with living an unhappy lifestyle.

When someone says live below your means, they are implying:

Do not purchase things purely based on social status.

Purchase products based on value versus brand name recognition.

Delay your want for something until you can afford it.

Many individuals (who have acquired wealth) prefer to drive a more economically sensible vehicle and choose to live a lifestyle that is not extravagant. The people who accumulate their wealth tend to allow freedom and flexibility with their finances instead of having an image to maintain.

9. Gain understanding of money through financial education. The potential returns on education regarding financial education are extreme.

Use these tools/resources to learn about:

Budgeting

Investing

Taxes

Personal finance fundamentals

Use:

Books

Podcasts

Free online classes

Trusted finance blogs

Having knowledge about finances can prevent individuals from being subjected to scams or making poor investments or financial decisions.

10. Have patience and remain consistent; Building wealth is a marathon, not a sprint.

Anticipate:

Becoming progressively wealthy at a slow rate initially

Experiencing setbacks occasionally while building wealth

Gradually getting better at building wealth over time

Staying consistent with actions will beat motivation. Repeating small, consistent actions every day for years produces life-altering results.

Conclusion

While it may not be easy to make money with limited resources, it is achievable with appropriate investment strategies and disciplined spending patterns. You will need to demonstrate discipline over an extended period of time and make sound financial decisions. You can reach financial freedom and develop long-term wealth by being disciplined in managing your expenses and making regular deposits, avoiding debt, and investing in your personal development.

Your financial status is not determined by the amount of money coming in but rather by what you do with the money coming in.