Are you ready to take control of your finances and reach financial success? It’s not as complicated as you think, even with an average salary. Becoming rich is achievable when you commit to making smart money moves and have the right financial strategies.
In this article, we’ll discuss some of the best things you can do to grow your wealth even with an average salary.
You’ll hear this all the time, but starting early is the best thing you can do for yourself. The sooner you start investing for retirement or open a taxable investment account, the better off you’ll be.
The reason for this is compounding returns. If you start at age 23, you only need to save $14 per day to become a millionaire by age 67. However, if you don’t start until 40, it would require $42 per day. This is assuming your portfolio has an average annual return of 6%.
“According to the Rule of 72, should your investments yield a 10% rate of return, your principal amount is projected to double approximately every 7.2 years,” says June Jia, Owner of Canny Trading and investment banker at GF Securities. “This represents a substantial accumulation of wealth over time.”
Jia discussed the importance of regular investments. “Adopting a disciplined investment approach, such as dollar-cost averaging, can enhance the pace of wealth accumulation by consistently allocating funds to your investment portfolio.”
If you start early, you can invest small amounts of money and still build a sizeable portfolio by retirement.
We live in a world where online influencers discuss the latest fashion trends or must-have gadgets. This can lead some people to spend more money than they might have otherwise. If you want to become rich with only a modest income, you need to prioritize savings. It’s important to have an emergency fund if you want to build wealth. This provides financial security if you lose your job or incur a large expense like a medical bill or car repair.
Once you determine how much you can save each month, make saving automatic. You can set up a direct deposit from your paycheck or schedule automatic transfers from your checking account. Automating savings will remove the urge to use those funds for anything besides building a cash cushion.
While it might be tempting to purchase the latest trends or eat at fancy restaurants, these expenses cause many Americans to live a paycheck-to-paycheck lifestyle. While it’s OK to eat out occasionally or treat yourself to something, make sure those purchases align with your budget.
If you’re spending $300 monthly at restaurants, reduce that amount to $150 and transfer the extra cash to your savings account or investments. If you’re spending $600 a month on groceries, look for ways to reduce that amount to $500. Finding ways to cut your spending and increase your savings or investments will allow you to accumulate wealth at a quicker pace.
Generate Multiple Income Streams
If your day job only provides an average salary, look for additional ways to make money. You could start a side hustle. Driving for Uber, walking neighborhood dogs, or even starting a business can be great ways to generate additional income.
“I started my web design agency in 2018, focusing specifically on serving coaches while juggling my role as a full-time mom to two kids under 4,” says Jennie Lakenan, website designer and strategist at JennieLakenan.com. “For about seven months, I balanced being a full-time mom and nurturing my business. Today my web design agency is thriving. I have a small team. We bring in about $500,000 per year in top-line revenue and maintain a 60% profit margin.”
If starting a side hustle isn’t a good fit, consider taking on a second job. The combined income from both jobs can improve your finances. As you generate extra income, look to create passive income streams. You could invest in the stock market or even purchase investment properties.
Clean Up Your Credit
Having a low credit score comes with some pitfalls. Most importantly, it’s going to make everything cost more. Lenders will view you as a risky borrower, meaning the interest rates for different loans will be higher than if you had a high credit score.
Build your credit score by paying your bills on time and keeping your credit utilization low. A higher credit score will help keep more money in your bank account over the long term.
The Bottom Line
Just because you have a career with a modest salary doesn’t mean you can’t accumulate wealth. By prioritizing savings and finding additional ways to make money, you can put yourself on a path toward becoming rich.
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