Building wealth isn’t just reserved for high earners. With the right approach, you can make meaningful financial progress even on a modest income. Using a strategy that incorporates regular saving, disciplined financial habits and prudent planning, you can carve a path toward prosperity, without a high-flying salary.
Start With a Clear Picture
Before working your way toward wealth, you need to know your starting point. Assess your income, expenses and debts. Make sure to create a complete picture that includes nonrecurring costs such as car repairs, home maintenance or vacations, as well as any anticipated income beyond your regular paycheck. Use this as the basis for a realistic, workable budget, leaving room for savings.
Pay Yourself First
Each month, prioritize paying yourself — even if it’s a small amount. Or better yet, automate savings so that you can save without having to think about it. And if you haven’t already, start building an emergency fund to cover six months’ worth of expenses so you can avoid putting unexpected car repairs or other bills on high-interest credit cards — or raiding your retirement nest egg. That way, you can take full advantage of compounding returns instead of chipping away at your savings, enabling even small amounts to grow larger over time.
Invest Wisely, Early — and Consistently
If you haven’t already, consider enrolling in your employer’s retirement plan. The earlier you start, the better. If you participate over a 48-year period, you could reach $1,000,000 by only contributing $170/month, assuming an average 8% annual return. Contributions in traditional 401(k) plans are tax-deferred, which lowers your taxable income. And if your employer offers matching contributions — that’s essentially free money. Try to contribute enough to receive the maximum match if you can, while still covering regular expenses. And if you’re aged 50 or over, you can even make catch-up contributions if you’ve fallen behind. A qualified Financial Professional can help steer you toward strategies and investment options that align with your goals and risk tolerance — and help you create a budget that includes regular investing.
Avoid Lifestyle Inflation
If your income increases, resist the urge to continually spend more. Avoid rushing out to buy that fancy new car or top-of-the-line smartphone. Make sure to continue living within your means — and strive to maintain or increase your savings. By sticking to your budget and plan, you can find satisfaction in the financial progress you’re making, though treating yourself to small indulgences occasionally can help you stay on track over time.
Track Progress and Tweak as Needed
Don’t just “set it and forget it” when it comes to your personal finances. Life changes, markets fluctuate, challenges bubble up and new opportunities arise. Review your goals and budget regularly to make sure they stay current and aligned with your long-term strategy — and reset or adjust to stay on track. Use tax refunds, bonuses and gift money to jump ahead on your savings goals.
Keep Your Eyes on the Prize
Building wealth on a modest income takes discipline, patience and perseverance, but small, consistent steps can produce meaningful results over time.
And don’t forget to celebrate when you reach a new financial milestone or hit a savings target. Take time to recognize and appreciate every investment you make in your financial well-being and the effort it’s taken you to get there. Stay focused, celebrate wins and keep your sights set on the long-term. Your future self will thank you.