If you’re wondering how you can have wealth when you’re not a millionaire, you’re not alone. Wealth is often associated with high income, beach houses in different countries, and luxury items.
But having and building wealth is about more than just nice things.
It’s about having the freedom to make financial decisions that sustainably support the life you want to live.
And that’s achievable no matter the income you have. While you may have more hurdles to jump if you’re trying to build wealth on a budget, it is doable if you stick with habits that support your goals.
Read on to learn productive ways to start building wealth today.
Change Your Mindset Towards Money
For many Americans, generating wealth is a mystifying concept, especially if you didn’t grow up having a lot of money.
It is completely normal to feel intimidated and even overwhelmed when it comes to building wealth. There are very real barriers that have limited access to wealth, including what is taught about money and how to think about it.
One of the most important and often hardest steps to take in your wealth-building journey is to understand that you are worthy of having wealth, even if you grew up in a system that made you feel like you weren’t.
By believing you deserve to have a secure financial future, you can focus on making choices and decisions that support wealth-building habits.
Earn and Manage Money Wisely
Earning money is an essential part of building wealth. However, this doesn’t necessarily mean you need a high income to do that.
The key to building wealth is about managing your money well, no matter the size of your income.
Some of the best ways to manage your money include living within your means, making a budget (and sticking to it), and avoiding wealth killers like high-interest debt.
These strategies help you save money, but it’s also important to focus on generating income. You can do this in several ways, so the sky is the limit. Whether you earn income at a job, side hustle, or earn passive income through investments, it’s important to keep the cash flowing.
It’s inevitable that an unexpected expense will pop up, whether that’s new tires, a trip to the hospital, or losing a job.
While you can’t know what expenses will surface, you can be prepared for them by having an emergency fund.
It’s recommended to have three to six months of living expenses set aside in a separate savings account so you can draw from it when something happens.
Develop Financial Goals
If you want to build wealth, you have to know where the finish line is. That’s why it’s important to have clearly defined, tangible financial goals.
These goals can be whatever you want and should reflect what you value, such as buying a home, retiring early, or sending your children to college.
By being specific and measuring out your goals, you can track your progress and clearly understand where you are in reaching those goals.
After you define your goals, it’s important to make a plan. Think about ways you can save or earn the money to make progress. This can look like saving your money, increasing your earnings, or investing.
Now, it’s time to put your plan into action. You should regularly review your progress and see what you need to adjust in order to keep in line with your goals.
Save AND Invest Money
Saving and investing money are two essential parts of building wealth, and it’s important to know when to do both.
Saving money is needed to help you reach the financial goals you set up earlier. To hit those milestones, you need the cash to do it.
If you focus on saving money to reach those goals, you can opt for strategies that cut your spending, such as changing your lifestyle. If you want to spend the same amount by increasing your savings, you can focus on earning more money or getting a side hustle.
While saving is a good strategy to meet many financial goals, you can’t save your way to retirement.
That’s where investing comes in.
Saving traditionally has a much lower return on interest rates than investing. So, for bigger and longer financial goals like retirement, investing is a better strategy since you can build more wealth over time.
That’s because of something called compound interest.
Compound interest is money earned from the total amount of money you invested (which can include the money you earned from interest). Since you can earn more interest on the interest you made, you get more money the earlier you invest.
By balancing your savings and investing, you can set yourself up for your short-term and long-term financial goals.
Manage Debt Wisely
As you grow in your financial journey, you may notice that it is worthwhile to have some debt to fund purchases and investments that align with your financial goals.
As with saving and investing, the key to managing your debt is all about balance. While too much debt can hinder your financial goals, carefully curated debt can bolster it.
These can include getting a mortgage loan, auto loan, or personal loan.
When considering if debt is a good option for you, think about how it would affect your debt-to-income ratio. To have a good debt-to-income ratio, your debt payments should still be manageable with the budget you’ve created.
You should also avoid high-interest debt when possible. If you do have a high-interest debt, though, you should try to pay it off as soon as possible or before you pay off the other debts you have. This will protect you from excessive interest charges.
Take the Next Step In Your Financial Future
Your financial journey can take you in a number of directions. At AMG Finance, we are here to help you along the way.
If your financial journey has resulted in some changes to your taxes, we can help you with our convenient tax preparation services.
Thinking about a loan to support your financial goals? We offer a variety of personal loans to assist you as well.
Whatever the next step in your financial journey looks like, AMG Finance is here to help. Visit one of our local branches to get started.