Wondering how to create wealth on your current income? Here’s a few simple strategies which the wealthy use to get wealthy and stay wealthy.
- Get out of debt
- Take an Inventory Of Your Spending
- Work For Yourself
- Pay off Your Mortgage Early – Or Get One!
- Live below your means
- Pay yourself first
- Don’t Look Rich
Take a couple of these strategies and run with them! You’ll soon discover how to create wealth on your current income.
Get Out Of Debt
Debt will keep you in debt forever if you let it. If you have debt it should be your main priority to get out and stay out. Pay off your credit card which have the highest interest rate first and highest monthly payments. What’s bad about debt isn’t just the monthly payments.
It’s also bad because you’ll be paying interest which will compound over time if you let it build up. Credit card companies want this. They want everyone to pay off the minimum amount every month. Then the balance gets pushed and the interest grows. Pay off more than your minimum payment each month to speed up the process of getting out. Don’t use your credit cards unless it’s an emergency.
Take An Inventory Of Your Spending Habits
You may not be able to immediately increase your income. However, the one thing you have the most control of is your spending. Unless you take an inventory of your spending, you probably didn’t realise how you spend money. If you’ve always had a job and money coming in, you might have become a little frivolous! Taking an inventory helps you see your habits in the cold light of day! Take for example the last day’s shopping. Write down everything you bought down to the last penny. Do this over a typical week in your life. You’ll soon see where you can make some changes.
In David Bach’s book The Automatic Millionaire, he calls this The Latte Factor. The Latte Factor refers to all those small purchases you make each day, just to treat yourself. This could be a coffee and a cake at the coffee shop.
If you drink or smoke, how much do you justify spending each week, because it’s your most important habit? Over time all these little amounts add up to thousands each year. A coffee in a coffee shop and a piece of cake is likely to cost around $5. If you only spend this on a week day, over the course of a year it will cost you $1300. Take a look at your spending and you can use the money you save to pay off debt, get out of the credit trap and start saving.
Work For Yourself
Whatever your current employment is, it’s a fact that most of the wealthy work or have worked for themselves. According to the “Millionaire Next Door”, by Thomas J. Stanley:
“Twenty percent of the affluent households in America are headed by retirees. Of the remaining 80 percent, more than two-thirds are headed by self-employed owners of businesses. In America, fewer than one in five households, or about 18 percent, is headed by a self-employed business owner or professional. But these self-employed people are four times more likely to be millionaires than those who work for others.â€
Anyone can now learn how to ‘leverage’ their income by using online marketing strategies. You don’t need to have any experience or prior knowledge of this industry to get started, and you can work around existing employment. Access a free video series here to learn more. An online business can let you get out of the ‘time for money’ trap of employment by using systems and strategies which can be automated and scaled.
Pay Off Mortgage Early – How To Create Wealth On Your Current Income
Not everyone is lucky enough to have got themselves into the position to get on the housing ladder. If you are on it, consider looking to pay more into your mortgage payments each month to reduce the term of your mortgage. This will not only mean having paid off early and freeing up that huge chunk of change each month; but you’ll also save yourself potentially thousands (or even tens of thousands) in interest payments.
If you’re not a home owner, consider how you might get on the ladder. Think about the rent you pay each and every month for your rent. You’ll be far better off paying this into a mortgage, even if it’s a part ownership program.
It’s similar to a forced savings plan. Since you’re paying out every month for rent, you may as well pay for a mortgage and have the opportunity of eventually owning the property. If you never pay the whole amount you’ll at least have built up some capital which you can use later.
Live Below Your Means
Wealthy people don’t fall into the trap of continually expanding their expenses on their lifestyles, as their income grows. Before it does grow, they have already learned to live below their means. Most people look to their bank account balance before making any frivolous purchases. If they have money, they’ll spend it. The wealthy know this and use it to their advantage.
They live below their means by paying themselves first and sticking to a budget, rather than continually spending more than they earn. Most people spend beyond their earnings, and continually fall into debt. Living below your means is the easiest way to counteract this tendency.
Pay Yourself First
The concept of paying yourself first is a useful one if you’re wondering how to create wealth on your current income. The government realised that asking people for taxes after they have already been paid wasn’t working very well. Instead, they discovered that taxing people before they were paid, at the point of payment, worked much better. They were guaranteed to get their money!
If you can learn to pay yourself first, you’ll be taking advantage of this same concept. The reason the government changed this is because most people are terrible with money. They spend first and then worry later! So the government had thousands of people who couldn’t pay their tax bills because they had already spent the money!
Wealthy people pay themselves first for similar reasons. If the money is there sitting it their bank accounts, they’ll be much more likely to spend it! So they pay into a savings account as soon as they are paid. Set up an automated payment into a separate savings account. Each month, when you get paid, the money goes out automatically. You get used to living on a little less each month and build up a savings fund. If you were to try and do this with what’s left after paying everyone else, all your bills, your mortgage etc., you’ll find it incredibly difficult. That’s why you need to automate the payment so you don’t think about it. Learning to live on less is a life skill which will serve you over and over again.
Pay Into A Pension
If you’re wondering how to create wealth on your current income, you should have a pension. Sounds boring right? A pension lets you offset income into a forced savings plan. You don’t pay tax on the money you put aside. Plus, many employers have a pension plan where they match your payment or pay a percentage of it. Your savings are then effectively multiplying by three fold:
- The savings in your taxable income
- Your money you put aside (and which accrues interest)
- The money put in by your employer
Don’t ‘Look’ Rich
Still wondering how to create wealth on your current income? This one is a no brainer! Building wealth can be done much faster if you’re not spending vast sums on holding up a ‘facade’ of looking rich. David Bach calls this “Big Hat No Cattle” in his book The Automatic Millionaire.
Research as Experian Automotive found that “61 percent of people who earn $250,000 or more aren’t buying luxury brands at all. They’re buying the same Toyotas, Hondas and Fords as the rest of us.â€
That’s because the wealthy are not willing to spend money on a premium brand that’s going to fall 70% in value within the first few years. They also avoid leasing cars for the same reasons. It’ll cost them more. Instead of building up an ‘image’ of looking like they’re rich, the wealthy focus more on building assets and reducing liabilities. A massive ego is a huge liability! Especially if it means you need a huge car, a huge house and can’t afford to keep paying for them.
See also wealth creation ideas and wealth secrets of the affluent. I hope you have enjoyed this article “how to create wealth on your current income”. Please leave a comment below.