As finances get tighter and Canadian housing prices continue to surge, it’s become more important than ever to pay close attention to your finances. Even well-paying jobs aren’t cutting it anymore, so you need to find new ways to get and save money if you ever want to get ahead.
Most people don’t know how to build wealth. They’ve never had to before, or they’ve never been in a position where it seemed viable to do so. When you’re living paycheck-to-paycheck, the idea of tucking away money for your future seems impossible.
We’re here to help you understand how building wealth can be an option for you regardless of how old you are. Not all of these financial tips will work for every person, but they can start you off on the right track.
Read on to learn more.
Start as Early as Possible
To preface this, we want to make sure that you know that you can start building wealth at any age. With that in mind, you’re always going to be better off if you start early. The best time to invest was a decade ago, but the second-best time is right now.
Remember that the money that you accumulate now will continue to grow throughout the rest of your life. Someone contributing $200 per month into an investment account or savings account for thirty years will have an easier time than someone who only had twenty years.
If you have children, you should also encourage them to start as early as possible. Start saving a small amount of money for your kids from the moment that they’re born so you can help them get ahead.
If you’re reading this, start today, even if that just means that you open up an investment account with $10. That’s $10 more than you had contributed before and it’s a great starting point.
Make a Budget (And Stick to It)
People who are making ends meet all do so by budgeting. This doesn’t mean that they have notebooks full of budgeting plans (though some do), but it means that they’ve learned how to allocate money every month to wants and needs.
We’ve discussed this before, but it’s in your best interest to follow the 50/20/30 plan for budgeting. This plan doesn’t work for everyone, but it’s a good starting point and you can make adjustments for your needs.
Track your spending for a month (be meticulous) and you might be shocked at how much money you actually put down the drain. Between unused subscriptions, overpriced trinkets, unnecessary coffee trips, and in-app purchases, many people find that they’re throwing away money without even realizing it.
When you make a budget, you’ll learn how to organize your money and spend it more wisely. After a while, you won’t have to write down your budget anymore (though it is helpful). You’ll be able to “eyeball it” and still keep yourself on track.
Set Specific Goals
While you’re figuring out your budget, you should also set goals for yourself. Both long and short-term goals are important and they’ll help you be smarter about your money. When you have a finish line in mind, it’s easier to stay motivated.
Make sure that these goals are doable or you might find yourself getting discouraged. If your goal is to be a billionaire, you may have to aim lower.
Common goals include things like house purchases, college funds, and retirement funds. You can also have shorter-term goals like family trips, though these aren’t as high-priority.
Decide what you want and figure out how much it will cost to get it. Find ways to adjust your budget to put money toward each of these goals every month, even if your contributions are small.
When it comes to “fun” goals, we recommend taking money from your “wants” budget. With larger long-term goals, divide up your “savings” budget.
Avoid (And Get Out of) Debt
In some ways, keeping a small amount of debt is essential. After all, you can’t build credit without accumulating debt. With that in mind, you need to keep your debt under control.
When you have debt, you’re always paying interest. That interest is money that’s coming straight out of your pocket with no added benefit. Getting rid of your debts is almost more important than investing (though you need to do both).
Do your best to pay off high-interest loans and always pay off credit cards as soon as you’re able to do so. This is great for your credit score and your wallet alike.
Invest Often (Even Small Amounts)
While having a savings account is important, it’s almost more important to have an investment account.
When you save money in a savings account (or in cash littered throughout your home), you’re not actually doing anything to build wealth. That money may accumulate a small amount of interest, but that interest won’t keep up with inflation.
Instead, invest. Anyone can invest now that fractional shares are available. You can buy a small percentage of a share for even a few dollars and still reap the benefits (albeit slowly) of the stock market.
If you’re not sure how to invest, it’s a good idea to talk to a professional for help. They can make sure that your money is going into safe investments with slow and steady growth. It’s tempting to go for riskier investments, but they’re more volatile and thus more likely to crash (which in this case is counterproductive).
Live Below Your Means
This is a tough one, but if it’s possible to spend less money on things, it’s time to do so. Living below your means will set you up for a better future.
This doesn’t mean that you shouldn’t keep yourself comfortable. As a matter of fact, you can have everything that you need while still living below your means (at most, but not all, income levels).
When you go shopping, always opt for store-brand options and affordable foods (like rice, beans, frozen vegetables, and pasta). You can make delicious meals while you’re on a budget.
Resist going out to eat or ordering takeout too often. If you tend to go for takeout because you’re tired from work, we recommend meal planning and freezing meals when you have the energy to do so so they’re ready when you’re tired after work.
Consider whether or not you need the nicest and newest version of something, and always take a few days to consider it before you buy it. Do you need a brand-new car, or can you get by with a used car that’s in good condition?
You may find yourself giving up some things, but the benefits outweigh the downsides when it comes to financing your future.
Look for Extra Income Streams
People who are building wealth should try to find extra income streams. This isn’t going to be possible for everyone, but if you have any spare time at all, it’s a good idea.
Avoid anything that seems “too good to be true,” such as multi-level marketing “opportunities.” While these are marketed as side-hustles, most people don’t make any money doing them.
Instead, look for legitimate ways to make money. Do odd jobs around the neighborhood and look for online freelance opportunities. Even if you’re only making a small amount of extra money, it will add up.
Remember, even $50 per week can pay for groceries or gas for a small household.
Always Seek New and Better Opportunities
Many people feel as though they’re stuck in their jobs. While this is true for people who are living paycheck-to-paycheck, on some level, you can always look for better opportunities and stick with your current position until you have a sure thing.
If you’re being underpaid, talk to your employer about a raise. If they refuse, look to see if there are any local job opportunities that you qualify for. Never be afraid to send in an application; the worst that they can say is no.
If you’re not advocating for yourself, you’re leaving money on the table.
How to Build Wealth: Are You Ready?
Figuring out how to build wealth isn’t easy regardless of your age or income level. There’s going to be some trial and error involved, but if you’re diligent, you’ll find yourself in a far better financial situation in the near future.
Protect your future self by using this financial advice to start building wealth as soon as possible.
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