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Everyone wants to be rich, but that can seem like a catch-22 if you are starting with very little or even nothing. You have heard the phrase “it takes money to make money” and think you’ll never be able to build significant wealth if you don’t already have some money to work with. But that isn’t quite true; there are some simple steps you can take to build not-so-insignificant wealth over time even when you don’t have a lot of spare change.
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It’s important to remember that you have to start somewhere — even those who inherited large sums of money had parents or other relatives who built wealth somewhere along the line. While it can feel like you are behind, don’t compare yourself to others. Instead, focus on what you can control, which is your own financial situation. Once you get started, you may find it isn’t as difficult as you expected, and building wealth can be empowering. Here are some strategies to get you started.
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Live Below Your Means
Living below your means is quite simple in concept. If you don’t live below your means, that means you are spending all (or nearly all) of the money you earn. In that case, you won’t have anything left over to start saving and investing. But living below your means is one way to start getting rich. “That means you have to have more money coming in, than going out,” said Brett Sohns, co-founder at LifeGoal Investments.
When you have more money coming in than going out, you can contribute more to your employer-sponsored retirement plan or Roth IRA. These plans are tax-advantaged, meaning that in addition to investing, you can also save on taxes.
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Set Up a Budget and Financial Plan
This may not be the first time you’ve heard you should set up a budget, and that’s because it just works. When you first start budgeting, it can be a discovery process because you may not know where your money is going until you see it laid out in front of you. On an ongoing basis, a budget can hold you accountable for using your money the right way.
The reason a budget is so powerful is because it doesn’t do just one thing. “Creating …….