5 Ways To Build Your Wealth in 2020
If you’re one of the millions of Canadians who are just "getting by,” you may roll your eyes when people ask you what you’re doing to "build your wealth.” What wealth, you may ask? Before you click away thinking this is just going to be another article that advises you to invest money you don’t have, hear us out.
isn’t about having an extra thousand dollars lying around to splurge on a
European vacation. It’s not about transforming from an Average Joe into a multimillionaire.
Building wealth is about the rest of your life, and about building a strong
financial foundation that will ensure your comfort into retirement. THAT is
something the average working person — including you — can do.
So, how do you get
started? It’s not as hard as you might think.
1. Create a Budget
There’s another term
that evokes feelings of frustration and desperation: "budget.” A budget may
sound scary (or, if you’re like many consumers, boring), but the reality is
that you need to know what is coming in and what is going out so that you can
begin to save. Once you figure those two figures out, it’s time to start
Begin with the easy
stuff, such as your fixed monthly payments.
Think rent, mortgage, phone payments, utility bills, health insurance costs and
the like. Then move onto the variable costs. Those include bar tabs, coffee
costs, grocery bills, entertainment expenses and eating out incidentals. The
latter type of expenses are those you can trim. A good rule of thumb to live by
is the 50/30/20 rule: Set aside 50% of your earnings for recurring, fixed
expenses, 30% on variable expenses and 20% towards savings and investments.
2. Pay Down Debt
Debt hinders wealth,
end of story. Not only does it inflate the longer it remains unpaid, but also
it ruins your credit, eats away at your gains and throws off your budget. If
you have debt, paying it down should be your ultimate financial priority. To
make sure you don’t miss payments, factor debt payments into your monthly
budget. As you pay off outstanding balances, use the money you would have put
toward that debt toward another debt.
Pro tip: Pay off
high-interest debts first, and, whenever possible, pay more than the monthly
minimum. This can help you avoid paying hundreds to thousands of dollars in
interest each year.
3. Reduce Your Living Expenses Where Possible
variable expenses is the easiest way to protect and build your wealth, but it’s
not the only way. Once you start trimming your variable costs, start looking at
ways you can reduce your overall cost of living. Can you downsize to a more
affordable neighborhood? Can you lower your electric bill by using a
programmable thermostat, taking shorter showers, fixing leaky faucets or using
energy-efficient appliances? Do you really need a Netflix, Amazon Prime and
Hulu account? Though individually, the savings may seem minimal, they will
really add up over time.
4. Look for Investment Opportunities
While it may seem
painful to invest with your newly acquired savings, think of your investments
as a payment toward your future self. By placing your money into a long-term
investment account, it will continue to earn for you. The same is not true of
money that just sits in a savings account.
You don’t need a lot
of money to begin investing. There are hundreds of accounts and opportunities
available that come with low startup fees and barriers of entry. In fact, some
of the best interest-accruing accounts allow you to get started with a deposit
of just $1.
5. Negotiate a Raise or Look for a Better Job
At the end of the
day, the problem may not be your lifestyle or your spending habits but rather
your salary. If you simply do not make enough money to afford even the most
minimal of lifestyles much less build your wealth, you’re doing yourself a
Before you change
jobs, do some homework. Look online to see what others in your line of work
with your level of experience make. If it’s more than what you currently make,
write down a list of your achievements and approach your boss with a request
for a raise. Hold firm during negotiations. If you walk away feeling
dissatisfied with the outcome, then it may be time to look for a new source of
You don’t need wealth, or even to make a lot of money, to build wealth. Follow the advice above to begin building a solid financial foundation on which you can happily retire.