Building Wealth By Getting Smarter With Your Money: 5 Step-Formula

Building wealth and achieving financial independence is everyone’s goal. But it does require us to make smart choices with our spending.

The other day I happened to review my bank statement on how we’ve been spending my money. I was in for a surprise. Our bank’s dashboard was reflecting that on average we’ve been spending more than we’ve been depositing.

Has that ever happened to you? I tried to see the breakdown of how the monthly expenses have been spent. Something has to change but what?

Steps for Building Wealth

We’ll follow a step-by-step process to reach our ultimate goal of financial independence and security. In order to build wealth, we first need to evaluate our expenses and try to get them under control.

Step 1 for Building Wealth: Evaluate Your Expenses

Start by evaluating your expenses and coming up with a plan moving forward. Here are some typical expenses that we spend on:

1. Home
2. Taxes
3. Utilities
4. Groceries
5. Transportation – Car/Gas
6. Food deliveries
7. Cloth shopping
8. Hair salon
9. Nails
10. Food deliveries
11. Entertainment
12. Travel
13. Misc. – Books, the odd repairs, learning & development etc

Then let’s separate the needs from wants.

Needs

1. Home
2. Taxes
3. Utilities
4. Transportation – Car/Gas
5. Misc – Books, the odd repairs, learning & development etc

Wants

1. Food deliveries
2. Cloth shopping
3. Hair salon
4. Nail salon
5. Entertainment
6. Travel

After evaluating the expenses, we have to think about ways to either reduce our expenses and earning more money. Start by reflecting on what can be done in short term and long term.

Step 2 for Building Wealth: Pay Yourself First

Notice what’s missing from the list. I wasn’t saving for the future. I’m putting some money in my 401k for work but I can’t touch that money until much later in my life. I don’t have a dedicated emergency fund separate from my bank account. Financial advisers say you’ve to pay yourselves first. I’d say I need to add pay myself first at the top of my “needs” then.

I know what some of you must be thinking. It’s hard to pay yourself first when you’re barely making ends meet and in fact spending more than you’re making. But you’ve to trust the process.

Just take the plunge of making a financial makeover for yourself. Try cutting down your expenses, and see if you can use any of your skills to increase your income.  The universe will make it happen for you. That’s the law of attraction as highlighted in the book, The Secret by Rhonda Byrne. Check it out here.

Step 3 for Building Wealth: Cutting Down on Some Wants Prudently

Focus on eliminating any of your wants. Adopt an abundance mindset. Focus on the things you have in your life instead of what you don’t.

Eliminating the wants has to be done prudently – little at a time. Don’t try to cut out all the little pleasures of your life otherwise you’ll make yourself miserable and will eventually fall back to old habits.  Life is worth living! Some little pleasures are worth keeping – you’ve to just find solutions on how to pay for them or keep a nice balance. 

I decide to curb my expenses by limiting myself to 4 food deliveries a month – once a week. I’ll need to curb my cloth shopping habit as well or at least reduce it. I’ll try if I can do my own hair color and see if I can do my nails at home. I’ll need to get smarter with our spending.

To get started, I’ll look for Amazon shopping deals rather than buying from the stores.

Step 4 for Building Wealth: Use Budgeting Apps to Review Recurring Expense

Another way to lower monthly expenses is to see which subscription services you’re not using. We made a smart decision of cutting cable a couple of years ago but we do have a lot of subscription services that we keep just in case.

The sad thing is usually there’s nothing good to watch so it maybe a good idea to review your credit/bank account statements to see if you signed up for a subscription for a streaming service that you forgot about and maybe still paying. For instance, I found that I did sign up for some free trial services that I was still paying for. It’s more common than you think!

The good news is that there are some Budgeting apps that can do this analysis for you. For instance, CreditKarma.com can link with your bank account and do a breakdown of how you’re spending your money.

Rocket Money rocketmoney.com (formerly called Truebill ) is a paid financial management app that could save you money through budgeting, lowering bills, canceling subscriptions, autopilot savings, spending insights, and credit score monitoring etc. One of the best features is automated subscription cancellation, which is well worth the premium account payment.

Step 5 of Building Wealth: Start a Side Hustle

These days there are so many opportunities to make additional income by doing part-time gigs, side-hustles etc. Start by figuring out what you enjoy. If you do something you enjoy, it will feel like fun and not really extra work.

I took some time to reflect on what makes me happy. Assisting others and imparting my expertise on several subjects makes me happy. I genuinely love to read and provide coaching on a wide range of subjects, such as entrepreneurship books, productivity, and personal development. I thought of starting a blog. So here we are people.

If you have interest in learning new skills to get financially independent, check out this article. In the current economic environment, it is so important to diversify your income streams.

Conclusion

It’s difficult to put yourself out there but I’m trying to do it one blog post at a time. And hopefully as per the law of attraction from the book, The Secret, I am wishing for the universe to make it happen for me.

If there is any tip that you may have, please feel free to share so we can learn from each other.

Take care everyone. Until next time!

This post contains affiliate links. If you click on an affiliate link and later make a purchase, we may receive a small commission. Clicking on an affiliate link which earns a commission does NOT result in additional charges to you or cost you anything extra. Money earned via affiliate links helps pay the fees to keep this site up and running. Thank you so much for shopping through our links to show your support for the brands that we love and the products that we share!