The media is full of ads touting easy ways to get rich quick, but when it comes to building wealth, there's really just one important rule: spend less than you make. It sounds simple, but it may not be easy.
The media is full of ads touting easy ways to do everything to from losing weight to quitting smoking. There are also pitches for financial advice that will help make you rich, but when it comes to building wealth, say most financial advisors, there’s really just one important rule: spend less than you make. It sounds simple, but it may not be easy.
If you tend to run out of money before your next paycheck, spending less than you earn may mean a serious sit-down with your checkbook and your credit card receipts to track just where your money goes. It helps if your bank or credit card issuer gives you monthly statements that segregate your expenses by category. To estimate cash expenditures, keep a record of what you buy with cash for a week or two. Once you have a handle on what you’re spending your money on, you can try to figure out ways to spend less. One way is to prioritize some “extras” and decide which ones, if any, are worth the money.
Hopefully, after you’ve done your homework, you’ll be left with a surplus. To avoid tapping into this extra cash whenever the urge hits you, get it out of your checking account. Your bank probably has a plan that will transfer a set amount every month from your checking account into a savings account. An online bank like ING Direct will do the same, and probably pay higher interest. Many brokerages and mutual fund companies have similar plans that allow you to put money into your chosen investments on a monthly basis.