How A Low Income Person Can Become Rich

Richness is not limited to a particular sect in society. Anybody can be rich but there are some measures that such an individual must be willing to follow. Being rich comes with financial independence and satisfaction. The gain of being rich is that you are financially independent and satisfied. You are not bothered by the thought of how to clear your debt or raise the next money for an emergency. Richness grants you financial stability. You are at peace knowing that irrespective of any financial challenge you might face you have a financial backup.

Richness does not only apply to the present situation, but it also encompasses both the present and future financial situation. This is why many persons fall into the get rich quick traps only to find out that they have only been scammed. Getting true wealth is an individual journey, no one can achieve wealth for you. There is no magic to help you become rich overnight but there are proven steps that have yield lots of testimonies among those who had tried it out. 

However, in a situation where what you are earning is not even enough to take care of your basic needs, how do you beat this and still hope to be rich someday? This question is what this article attempts to solve. Here are 12 steps to becoming rich irrespective of the level of your paycheck.

• Practice Self-investment

The first step to becoming rich is awareness. Awareness of your current situation and a drive to increase your option. The best way to increase your option is to invest in yourself. This implies that self-investment is very crucial to becoming financially independent. However, unlike what many often think, self-investment is not limited to expanding your knowledge by studying more. It entails an awareness of your inner strength, your skill and capacity, and the readiness to invest in these areas. 

Self-investment would involve the readiness to get out of your comfort zone and be ready to take risk. Risks are challenges that help to expand your experience. You can make mistake at the first few trials but however terrible your mistakes might be, they are the best teacher.

Maximize your potential, find the time to increase your skill. The world has gone beyond being mediocre. Spend money in your education and in your skill. Broaden your horizons and connect with others. Do not be afraid to connect with people who you often look up to. Technology had made it so easy that we can connect with those who inspire us. Gain experience, gain knowledge and this would open your mind to valuable opportunities.

• Create A Budget

No matter how little you earn, creating a budget is very essential. It is one of the major factors that determine how rich or poor you would be. The first importance of having a budget is that it helps you to keep track of your spending. Budget helps you to know if you are spending below or above your income and also helps you spend mindfully. This is why creating a budget is very key if you want to get beyond your present situation. 

In your budget, calculate your expenses including car expenses, mortgage, and every other expense and calculate all your streams of income and how much you are likely to generate in a month. 

After you have done all the calculations, substrate your expenses from the total money you earn per month. This would make you see where you have been spending more than you should and know if your expenses are not more than your income.

Creating a budget also helps you get rid of bad debt especially on high-interest credit cards. With the budget, you can set aside some money for your debt and still have some to save for emergencies. This leads us to the next step 

• Create An Emergency Account

Having drafted a budget to keep track of your spending, beat down your expenses such that it is below your income. Even if your income seems insubstantial to carry all of your needs, focus on the most relevant ones and let go of others. Next split the remaining money into three groups. One group for emergencies, one for buffer and the last group for a retirement plan.

The emergency account is similar to the buffer account but very different. The emergency account is strictly for unforeseen circumstances like losing your job, illness, and accident. When any of these occur, the emergency account act as the fund that would help pull you through this tough time. 

Usually, people substitute emergency account for a retirement account. The truth remains that the two serve different purposes. When you withdraw from your retirement account for emergencies, you would have to pay some consequences like a 10% penalty and pay tax, especially if you are not up to the retirement age of 59½.

• Create A Buffer Account

While emergency account attends to serious emergencies that need immediate attention, buffer simply means that you leave some money in your account. This could be within $500-$800. The importance of this is to avoid account overdrawn in case you are debited for a bill one or two days before your paycheck comes in. 

It also helps with credit card debts.  Although considering your financial situation, the buffer might be difficult to practice but it is not impossible. The goal is to have something in your account and not to leave it empty.

• Have A Retirement Plan

Retirement plans are very necessary if you aim to be rich and financial independence. A retirement plan is a way to secure your future ahead of days after you are no longer working. Usually, many think retirement plans are for those who are close to the age of retirement, but this is not true.  The best time to start planning for your retirement is while you are a youth.

Read also: The Best Type Of Retirement Plan To Have If You Want To Retire Early

This is because when you start your retirement plan early, you would be able to save more and earn more when the time for your retirement comes. When you retire the money can be channel into your passion or what any business plan

The two major types of retirement plans are the IRA and the 401(k). If for example, you have a boss that has already set a 401(k) plan for you, all you have to do is take advantage of the matching benefits. Depending on the type of 401(k) plan your employer opened, the 401(k) plan allows you to invest your money in other opportunities. 

However, if your employer does not have any 401(k) plan for you, you can simply open an Individual Retirement account(IRA). IRA has two types of accounts, Roth 1RA, and traditional IRA.

• Invest In Stocks

This is very crucial to building your financial ability and becoming rich is to invest in stocks. In fact, most of the rich persons we have today made their wealth from investment in different stocks. Stock is a way to allow your money to grow. Depending on the type of stocks you are starting with, it is advisable not to start with the hottest stock in the market. This is because most times the hottest stock is very expensive.  It is advisable to spread out your money as much as you can. However, be careful not to spread too wide so that you don't get confused.

If you are new to investment, you should start by trying a Robo-advisor. This is simply a computerized platform that offers complete management of your portfolio using a computer algorithm that helps ensure your investment performs well in the stock market. Robot investment does not charge you unduly for their service, all you need to do is pay a management fee of $0.25

Among the best Robo-advisor we have is Betterment. Betterment offers a very simple and inexpensive way to invest your money. It does not have a minimum amount to get started. This implies that you can start with as low as $500. Once you register with the platform, the advisor takes over your portfolio and walk you through the steps by step guide of the investment process. The Robo-advisor also helps rebalance your portfolio and continues to invest your profit.

Also, since betterment is an online platform, every step and action in the investment portfolio are handled automatically and accurately. Betterment handles the process of investment selection, rebalancing, asset allocation, tax-loss harvesting and many more. All of these processes are done for you at a very reasonable price.

• Pay off Your Debt

This is one factor that can stand as an obstacle to achieving the wealth you desire. Now that you have sorted out your budget and also your savings accounts like buffers and emergencies, the next item on the list is your debt. The first part of your debt that you should attend to is your credit card debt. Try as much as possible to pay off debts and as you do try to avoid future ones.

Next after the credit card is the student loan. Like a credit card, pay this as soon as you can irrespective of the duration of the loan. Paying on time would help you save better and avoid paying too much interest.

The next debt is the mortgage. In clearing your mortgage debt, it is advisable that you take your time, attend to the other two types of debt first before attending to your mortgage debts.

• Beat Down Your Expenses

Although the importance of having a budget has already been explained, it is important that you reduce your budget. Most times, those who are financially dependent don't have an expensive car they drive around town. This is because the amount spent on car maintenance alone is enough to invest in other areas.

The more you cut down your expenses, the more money you have to invest in other important opportunities. Cut down your expenses ruthlessly, especially expenses on the things that don't serve you. The more you do, the more you have to invest.

• Put Your Financial Plans To Autopilot

This is one of the easiest ways to get rich. Thinks constantly about your financial plans, meditate on them daily and work towards achieving them. To keep things simple for you, automate your financial plans. This implies that once you get your paycheck, you will direct a portion to be transferred automatically to your retirement plan account and your emergency account whole reserving something as your buffer

Next, direct all recurring payments to your bills including your credit card bill, tuition, utilities, and car payment. Also, set up an automated payment for your investment account. Having done all of this,  ensure you review your automated plan at least once in a year. When you do try to increase your funds as you progress.

• Cultivate A Mindset Of Being Rich

The state of our mindset is important in everything we do. Your beliefs and attitude about money would determine how well you can manage it when it comes. Here are some of the questions you can ask yourself to sort out this:

• What are the types of lifestyle I am accustomed to?
• What is my philosophy when it comes to managing money?
• What is my belief about paying debt and saving money?

If you want to be rich despite your financial situation, you have to have the attitude that can help you manage it. You need to develop a money mindset, you can't only desire financial freedom and be willing to work towards it, you must also believe that you deserve to be rich and you can be rich.

• Take Care Of Your Health

“Poor health habits create detrimental luck,” Corley wrote. “This is a type of luck that is a byproduct of poor habits, poor behavior, and bad decision making.” Your health is one crucial aspect that you should not neglect. Ensure you take good care of yourself.

• Have Multiple Streams Of Income

Relying on just one source of income can be very delicate. If you are truly looking forward to becoming rich, then you should invest as much as possible. Your other source of income could include a side hustle or a part-time job. It could also be a form of service you can provide.

You could also get money from passive income like an asset that pays you on a monthly basis without having to work too much or payment for a service you once render but no longer doing. 

Another source of passive income is the dividend. Dividend on stock is another way to earn and grow your wealth. All the above-explained kinds of source are very necessary to get wealth quickly.