5 Money Management Strategies For Building Wealth
Tony Stephan, RD
Registered Dietitian, Owner of Stephan Group Real Estate Brokerage, 259 rental properties, & Online Dietitian Academy / Telehealth Services
You don’t have to be wealthy to understand money management. In fact, learning some basic money management skills comes FIRST if you want to build wealth or grow your business.
5 Money Management Tips Everyone Can Use
It doesn’t matter whether you’re a Registered Dietitian like I am, have your own business like I do, or have another career altogether. The money management tips I’m about to share with you can be used by ANYONE and EVERYONE.?
The key is to understand them and LIVE by them day in and day out. When you do, you might be surprised at how far you can go and what you can achieve!
1. Live, save, and invest with the 40/30/30 rule.
What does this mean? It means using only 40% of your income to pay for everyday living expenses, 30% of your income for taxes, and putting aside 30% of your income for saving or investing.
You may have heard the advice ‘live on less than you make’ from your grandparents. Believe it or not, this money management tip still holds true today!?
But what do you do with the money you’re NOT living on? After paying taxes, THIS is the money you can use to build up a sizable nest egg. Then, you can use some of it to invest in income-producing assets like real estate.
This is the exact plan that my wife and I have lived by. We grew our career and business incomes, then used our earned income to start investing in real estate. Now, our real estate assets continue to produce passive income month after month, year after year. And, thanks to some savvy real estate investing strategies, we no longer have to pay taxes!
2. Create and STICK to a budget.
Instead of wondering where all your money has gone, why not give it a specific job to do each month? That’s exactly what a budget does. YOU get to decide where and how your money gets spent.
If you want to build wealth or achieve financial freedom, living on a budget is key. It’s also important to remember that your budget should be adjusted each month based on your expected income and expenses.
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3. Stop renting and buy a primary residence.
There’s no question that renting your primary residence can be beneficial at times. For example, if you’re only planning to stay in a particular area for a limited time, it makes sense to rent vs. buy.
But if you’re planning on staying put for a while, buy your home instead of renting it. Think of it like this - owning your own home is like a forced savings account that continues to increase in value over time. You can even turn it into your first rental property later on like my wife and I did.
4. Don’t use your earned income to buy liabilities.
It can be tempting to act like you’re wealthy before you actually are - flying first class, wearing designer clothes, buying fancy cars. These are all great, but there’s a time and place for them as well as a better way to buy them.
After you’ve grown both your earned income and your passive income, use your PASSIVE income from assets to buy the nice things that are actually liabilities.
5. Manage your money WITH your partner or spouse.
You’ll never build true wealth if you and your partner have different money goals or ideas about how to achieve them. Talk about money together, create money goals together, and budget, save, and invest TOGETHER.
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