How to Get Started Building Wealth
Take the first steps to building wealth.
Ways to earn more money and spend less so that you’re accumulating savings and can start investing to grow your money.
To build wealth, you need your money to work for you, for example, in the stock market where over the longterm average returns are between 9-11% annually. Though it is possible to start investing with only $5, in order to mitigate risk and have enough investable assets for a diverse portfolio, you need to ensure you have sufficient cash and a good handle on your income and expenses. Or, put more simply, each month do you have more money coming in than going out, such that you’re building your savings?
When you’re trying to build up your financial reserves—whether it’s to get started investing or to invest more, to put towards a down payment on a home, or any other financial goal—you need to bring in more than is going out. Dealing with debt and having enough savings are important considerations, too.
Here are a few ways to increase how much money you have at the end of each month.
Get more money coming in
Some financial experts will solely focus on having you reduce your expenses, but that’s generally not pleasant and you can’t save your way to wealth. So, bringing in more money is usually the more exciting option. It may not always be fast, easy or straightforward, but figuring out ways to bring in more money can be very rewarding (pun intended). You may want to:
negotiate a raise at your current employer,
raise the rates you charge clients,
find a new job that pays more,
get a second job,
sublet a room in your home for extra income,
start a side hustle, or
join the gig economy.
Assuming you don’t have a lot of debt, just bringing in a couple hundred extra dollars per month can go a long way to building up a financial cushion that you could then invest. Be careful of lifestyle creep as you earn more: it can be easy to spend more or want to ‘reward’ yourself for the extra earnings. Keep your same level of spending even as you bring in more money then you can have money to start investing or to achieve other financial goals.
Reduce how much money is going out
Decreasing how much money you have going out each month doesn’t need to be all about cutting back and living like a pauper. Sometimes it’s about being smart, knowing what you can ask for and finding the courage to do so, or having good self-knowledge. Here are some ideas:
Call and negotiate a lower rate on your monthly expenses such as your cable bill, cell phone bill, or credit card interest rate if you carry a balance, etc.
Opt for a cheaper plan of any monthly subscriptions you have, especially if you don’t use them much (Netflix, Uber/Lyft, Spotify, fitness memberships, etc).
Cook at home instead of getting takeout or dining out.
Help the environment & your wallet by buying fewer clothes or buying secondhand.
Sometimes knowing what’s important to you and focusing your spending there—on things or experiences you really enjoy—can make it easier to spend less on things you don’t care as much about. In fact, it can be an easy way to save an extra $200 or more each month without feeling deprived. Not sure how? Follow along with my video course: Spend money on what's important and save the rest.
In just a few months, whether you’re bringing in more money or spending less—or both, it is possible to amass a decent amount of financial reserves that can be used to fund a new stock market investment account or put towards other investment or financial goals. Since many brokerage houses have a low or no minimum, you can start small and continue contributing money each month to grow your investments. Keep moving towards having your money doing the hard work of building wealth for you.
