Focusing on financial well-being lets you assert your own path to financial security. Of course, you may achieve wealth through the process, but the spotlight remains on you, your financial needs, and the unique actions you take.
It is a common misconception that your income level and material possessions define your wealth. However, a person with a large income might live paycheck to paycheck with an expensive lifestyle that limits his or her ability to accumulate wealth. Wealth isn’t defined by how much money you earn – it’s about how you grow and save your money to meet your changing life circumstances.
Spend less than you earn.
Like all habits that lead to financial freedom, spending less than you make is simple to understand, but hard to follow. For some reason, we always want more. The problem isn’t about how much we make. We are the problem. And this is critical to understand because until you identify the problem, you can’t fix it. If you think the problem is your income, you’ll spend your energy trying to make more money. While there is obviously nothing wrong with making more money will not make the concept of spending less than you make any easier. So what will?.Bolster your savings and reduce your expenses. Remember, just because you can have something doesn’t mean you need it.
As they say: if it were easy, everybody would do it. However, like any habit, once you start spending less than you make consistently, it does get easier. And with some determination, you can do it.
Save for future spending.
The importance of saving money is rarely disputed. Saving is one of the most basic (and most repeated) bits of financial advice out there. Despite the importance of saving money, many of us aren’t following through on that tip. When it comes to doing the right thing financially, just knowing you should save isn’t enough. And that makes sense. It’s tough to do something consistently without understanding why you should save money and put in all that effort in the first place. After all, saving money takes discipline and a certain amount of sacrifice.
Knowing the reasons to save money can be critical if you want to stick with a savings plan for the long term.
Get yourself into a habit of saving. Start simple by taking advantage of any automated savings or investments that exist. Then build your habit, checking in as you get closer to your goal.
Only borrow what you can afford.
If you think you want to borrow some money, be sure you can afford any new monthly repayments on top of your current outgoings. Knowing exactly what money is coming in and going out each month will help you work out whether or not you can afford extra credit. Don’t deny yourself, but avoid spending for an outward show or status symbol. Consider the loss to your long-range goals when you choose to spend now. Remember, every dollar borrowed today is a dollar less to spend tomorrow.
Grow your money.
Work with a financial or tax advisor to structure investments so you can gain tax advantages. Contribute as much as you can to employer-sponsored retirement plans, especially if your employer makes matching contributions.
