Building wealth has very little to do with how much you earn, and a whole lot to do with how you manage the money that you earn. People with six figure incomes can be living from paycheck to paycheck while people with modest incomes can be accumulating a great deal of wealth. Here are some behaviors that will help you to accumulate wealth:
1. Pay as little tax as possible by taking advantage of the tax breaks and tax rules.
2. If you have difficulty saving, think of creative ways to eliminate wasteful expenditures. The key is to always spend less than you earn.
3. If you get a raise, bonus, or a large tax refund, don’t spend it just because you have it. Instead, save it and invest it wisely. You don’t have to increase your expenditures just because you suddenly earn more money. Most millionaires live well below their means, driving older vehicles and living in modest homes.
4. Make contributions to tax deferred retirement plans so you can get some of your money back. Use that money to pay off a chunk of your mortgage or other debt.
5. Credit can either be used to set you back financially or it can be used to help you build wealth. Rather than racking up credit card debt to purchase consumer items (bad debt), use debt to finance an investment in real estate (good debt). It’s important to be mindful of the difference between good and bad debt. Good debt is debt used to purchase assets that can generate cash flow. Bad debt is used to purchase liabilities such as furniture that will depreciate in value.
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