Building wealth and achieving financial freedom takes time, there’s no doubt about that. But, you can certainly shorten the process by learning how to manage money so that it works FOR you, not against you.
Growing your EARNED income and finding ways to make PASSIVE income is a great start. But you won’t ever achieve TRUE wealth without some basic money management skills.
5 Money Management Tips Everyone Can Use to Build Wealth
Today, I’m going to share with you my top 5 money management tips. Keep in mind that these ideas are not just theory. They are proven strategies that I personally used to go from being a Registered Dietitian with an average income to a successful real estate investor making over 6 figures per year.
1. Live by the 40/30/30 rule.
Here’s exactly what this means:
- Spend 40% (or less) of your income on living expenses.
- Pay 30% in taxes.
- Put aside 30% of your income for saving or investing.
When you live on less than you earn and consistently save 30% of your income, you’ll be amazed at how quickly you can grow a sizable nest egg.
Before investing in real estate, my wife and I worked hard at our careers to grow our earned income. Then, I started my online dietitian coaching business and worked to grow the income from that.
By following the 40/30/30 money management rule for several years, we were able to build up significant savings to then invest in real estate. Now, thanks to our real estate investing strategies, we no longer pay taxes!
2. Live according to a budget.
Many people dread the ‘B’ word because they think it’s restricting. But having a budget and living by it actually gives you freedom. That’s because YOU get to tell each dollar where to go and what to do instead of coming to the end of a month and wondering where your money went. Now THAT’S the true definition of money management!
In addition to creating and following a budget, make sure your budget is flexible. In other words, it should be able to change from month to month based on your current expected income and expenses.
3. Buy your primary residence instead of renting.
There’s nothing wrong with renting, especially if you’re only going to stay in one place for a short period of time. Renting can also be useful when you’re first starting out. You’ll have a set monthly payment and are not likely to have to worry about property or building maintenance.
As soon as you can, however, I recommend that you buy your primary residence. In my opinion, this is like a forced savings account and it even appreciates!
Plus, you can even turn your first home into your first rental property later on like I did. This is one of the easiest ways to get started with real estate investing and rental properties.
4. Practice delayed gratification.
Many people want to LOOK wealthy or successful before they actually ARE.
Here’s my advice: don’t waste your earned income on buying fancy things, flying first class, or shopping for designer clothes. Those things can all come later (if you choose) when you actually have real wealth.
First, grow your earned income so you can buy assets like real estate that produce passive income. Then, you can use your portfolio income to buy liabilities (the fancy car, boat, etc.).
5. Talk about money with your partner.
Whether it’s with your business partner or your life partner, you MUST become comfortable talking about money management together. In order to become wealthy or achieve financial freedom, it’s essential that you’re on the same page.
My wife and I work, budget, save, and invest together. And, we create money goals together. This allows us to be working WITH each other, not AGAINST each other. I think you’ll find building wealth and achieving financial freedom much more rewarding when you can do it alongside your partner.
Learn These Money Management Skills and YOU Can Achieve Financial Freedom!
Master the money management skills I’ve listed above and you’ll be well on your way to building wealth and achieving financial freedom. Then, you can live life on your OWN terms!
Want to learn exactly how I’ve done that? Check out my book, The New Rules for Financial Freedom. If I can do it, you can, too!