Living Within Your Means To Build Wealth

There are certain rules to money – save, invest, reinvest for compound gains, etc. These rules are universal and have to be followed to a certain degree for sustainable wealth to be created

There are certain rules to money – save, invest, reinvest for compound gains, etc. These rules are universal and have to be followed to a certain degree for sustainable wealth to be created. One of these rules is to live within your means and it really just involves maintaining a lifestyle or ensuring that your overall expenses are well below your line of income.

On one hand, it is to build discipline so as not to constantly be in debts; on the other, it is to keep your expense well within your control so that you have more than enough money left to be able to invest your funds for sustained and long term wealth to be created.

Particularly, if your reason for not investing in the stock market is because you don’t have enough disposable income left, here are some tips to guide you:

Save First, Then Spend

If you spend 100% of your monthly income, especially as a salary earner, you are not living within your means. While it is true that you wouldn’t be able to invest, it is also only a matter of time before an emergency comes up that forces you to seek a line of credit.

It could be to take on an opportunity or to handle an expense you didn’t plan for. The rule is to extract a portion to save and ultimately invest and then spending what is left.

__Distinguish Between Your Wants And Your Needs__

The key thing that causes us to live above our means is our quest for luxury. Wanting something and needing something mean two completely different things. When you create your budget for a specific period of time, the next thing you must do is set aside which of them can be avoided and which of them cannot.

Now, this doesn’t mean you should be restricted. It just means you objectively try to determine the purpose for every item you spend on. Do you really need this now?

Increase Your Income Streams

Living within your means without trying to stretch what those means are would have you in the same place for too long a period of time. The essence of having a level of disposable income available to spend is that you would be able to invest for the long term and build wealth.

The best way to increase your streams of income is to invest. If you’re investing in something like stocks, then you need to be willing to give it time to grow. Soon, it could be a passive source of wealth you didn’t even know you had.

Don’t Be In A Hurry To Upgrade Your Lifestyle

On stock investments, you would make dividends. On some others, like a business venture, you would record profits. When you do earn additional income, the first thing to do is not to have an immediate upgrade to your lifestyle like increasing the quality of clothes in your wardrobe or upgrading your cars.

What you want to do is to reinvest. The ability to delay gratification is one of the attributes of the wealthy. Keep reinvesting until your income level is well above your level of expenses and you would soon attain financial freedom.

Written by Lawretta Egba.