Habits To Help You Build A Fortune On A Small Salary

Published: May 26, 2017 | Updated: August 2, 2020 | Posted by: Luis Tan | Personal Finance


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Many of us assume that if you have a small or average salary, you cannot build a wealth out of it. Nevertheless, have you hear about ‘it’s not how much you earn but it’s how much you save?

Imagine two employees, one with high income and the other with an average income. The employee with high income spends all of their paychecks quickly, while the other employee saves at least 30% of their salary. At the end of the year, who do you think has more savings?

Live ‘secretly rich’

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Some people want to show off their material possessions. It’s a mix of lifestyle inflation and trying to keep up with unrealistic societal standards. Instead, focus on your own lifestyle, and let go of the need to satisfy others. Think of it this way: even if other people look wealthy, they might be drowning in debt.

You, on the other hand, live a frugal life and keep most of your money saved up for the future. Think of it like you’re living “secretly rich”.

Set a saving goal higher than 20%

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If you ask personal finance experts on what is the ideal percentage of savings to what you are earning, their common answer is 20%. This is the set standard and can be considered as balance. Nevertheless, if you want to save more than usual people do, save higher than 20% and boost your savings in no time.

Multiply your savings

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We all know that banks offer very low interest rates on savings accounts. Aside from this, another enemy of your savings is inflation. As the value of your money depreciates in the market, so do your savings.

The key to beat low interest rates and inflation is an investment. There are a lot of investments you can start without having to spend huge chunks of money. However, it is important to carefully study first where you wanted to invest. Measure the return and risks inculcated in it.

Record your expenses

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It is important to keep track of your expenses so that you can evaluate if you are spending the right way. You can use different personal finance apps like Wally[1], or Expensify[2] to simplify your recording.

Moreover, because you’ve recorded your expenses, you can see where all your money is going, and it serves to inspire you a little more.

Reward yourself

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Saving money does not mean you have to be frugal all the time. There is a high chance that if you do not reward yourself occasionally, one bad day could lead to a frustration-fueled impulse buy that you regret. There really isn’t anything wrong with the occasional break from saving in order to treat yourself, as long as it’s done in moderation.

Final thoughts

If you really want to build wealth out of your salary, it will all boil down in your lifestyle, spending habits and the ability to be consistent with your savings. You have to be patient and have focus. Start planning ahead and always think long-run instead of short-run pleasures in life. Sooner, you will be able to achieve wealth out of what you are earning today.

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