How to save money when you are on a tight budget. This is a major concern for many people, especially when you have more money going out than coming in each month. When you barely are staying above water to make ends meet, it causes stress and anxiety.
The ideal dream is to have enough money to pay our bills and have extra money left over to use for fun or other means. However, for some, it is just that, a dream. If you have struggled with this situation, this article will review ways you can build wealth on a budget by saving money for the future while also creating additional income streams.
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We will discuss the following steps to build wealth:
- Paying yourself first financially
- Create an Emergency Fund
- The importance of living below your means
- Side hustles make extra money
- Doing your home projects
Paying yourself first financially
My father would always tell me that when you receive income, you should always pay yourself first. For example, he taught me that if you make a dollar, pay yourself ten cents. I understand that a dollar today may not stretch as far as it did 30 or 40 years ago. The importance of paying yourself first is a concept of always setting money aside for yourself on regular basis.
Ways to pay yourself first:
- Save through your job – If you work for a company that offers a retirement savings plan such as a 401k or 403b plan, it provides you a way to systematically save money through payroll deductions. This money can be invested in stocks or bonds to grow over time.
- Self-employed – You can save money through a SEP (Simplified Employee Pension) IRA or a traditional IRA (Individual Retirement Annuity).
- CDs, savings, or checking account – Each time you are paid set aside a portion of your money for the future. Check with your bank on which option is best for you.
- Cash on hand – Simply place cash aside each month in a secure safe place
As illustrated, these are only examples. Everyone’s situation regarding how they save and how much money they save is unique to each individual. While saving 10 percent or more of your income on regular basis is suggested by financial experts, use your best judgment for paying a portion of the money you make to yourself regularly based on what your cash flow allows.
Please consult with a financial advisor on how to participate in retirement saving programs, as well as, how much you should save and how to choose investments based on your goals.
Create an emergency fund
The importance of an emergency fund is to prepare for unexpected situations that occur. Let’s face it, life happens, and we can experience curve balls that catch us off guard. The car breaking down, an unexpected medical expense, or just needing money to pay a higher-than-expected utility bill.
How much to save for an emergency fund? Financial experts suggest setting aside 3-6 months’ worth of your normal monthly expenses. While this may seem like a lot, the important thing is to aim for this as a goal. Start with setting aside money into a bank account or cash on hand. Make a goal to save one month or more worth of monthly expenses each year until you reach your desired goal. Only use these funds for emergencies and replenish them if used.
It helps to be prepared by having money set aside in an emergency fund. The benefits are that it minimizes the need to use credit cards to pay for expenses and it provides a buffer to soften the blow when the unexpected happens.
The importance of living below your means
To live below your means is an important step in reducing the amount of money you spend each month. Spending less of your income on items that you can make yourself or minimizing making large purchases can help increase the amount of money that you save over time.
We will explore tips for living below your means:
- Eat out less, cook at home more
- Make your coffee instead of paying a lot extra at your favorite coffee shop
- Payoff your car and keep it for 5 -10 years instead of buying a new car
- Shop at thrift shops for clothing or appliances
- Don’t buy what you cannot afford
To live below your means does not mean that you cannot reward yourself from time to time. You can still have that special coffee you like at your favorite coffee shop, eat out occasionally, or purchase that special outfit that you’ve had your eyes on for some time. The point is that when making decisions to purchase something, evaluate if it is worth buying now or saving for later. Spending less allows us to save more.
Side hustles make extra money
Make extra money from side jobs. This is a great way to bring in additional income to help with your expenses. However, I would challenge you to take this a step further. Start viewing side hustles as an investment. It adds value to your bottom line for saving money when it is done consistently over time. This also gives you additional streams of income for the future.
Here are a few examples of side hustles you can start:
- Learn to do business online such as an Affiliate Marketer. Visit Wealthy Affiliates to learn how.
- Be an influencer on YouTube teaching how to do repairs on something you specialize in
- Become a Life Coach. If this is your goal, allow iPEC to show you how to get started as a Life Coach.
- Work as an independent delivery driver for companies such as Door Dash or Grubhub
- Drive for Lyft or Uber to earn money
The list can go on and on. The important thing is to develop a skill to make extra money. More skills can lead to more options and provide you with a way to build wealth.
Doing your home projects
When it comes to our homes, we all can identify with things breaking down from time to time. I had the personal experience of learning a valuable lesson about home repairs many years ago. It began with a small faucet leak that I felt could only be fixed by a plumber. So, I did what many people may do, I called a plumber to fix it. The plumber came and fixed the leak within less than one minute. You can imagine how shocked and surprised I was that he could complete this so fast.
The plumber took me aside and told me that he was going to teach me a lesson. The service call to my home was going to cost $50 and he felt that I might benefit from what he was about to say. He explained that the faucet leak was the result of a 10-cent washer needing to be replaced. Washers like many men made products wear out over time. He stated I could have easily done this repair myself. I call this my $50 learning lesson for doing home projects and repairs.
The lesson I learned that day taught me that money could be saved by doing some of my home projects and repairs. These are extensive and can range from doing lawn work, repairing appliances, painting, and occasionally small plumbing repairs. You get the point, doing some home projects and repairs can add up and save you money to be used for additional investments. Of course, when the project or repair is beyond your comfort level to do then hire a professional.
We have reviewed steps that you can use to build wealth on a budget. Ideas discussed included paying yourself first, starting an emergency fund, living below your means, taking on side hustles to earn extra income, and doing your home projects or repairs to save money.
When it is all said in done, building wealth takes time. However, using self-discipline to make this a habit pays off after a while. Little by little it all adds up. Now is your opportunity to apply these steps to building your wealth. Please share your comments and ideas you have developed for building wealth. We can all learn from each other.