The Ultimate 5-Step Guide For How To Build Real Wealth And Actually Enjoy Your Life
Extreme frugalism steals the joy from your life.
You always say no to everything: coffee, happy hour, going out, and enjoying life.
Being overly frugal is exhausting. You become frustrated. You stress. You're unhappy.
The path to financial freedom isn't about eliminating every pleasure from your life and always finding ways to save money. To become wealthy, you must increase your income and net worth so you can fund a life you love.
I used to think that I had to follow a strict budget and save to build wealth. I eliminated all of the things that I enjoyed doing in my life. I only became focused on work, and I went crazy. It wasn't until I began to relax and make room for the things that I enjoy that my life became more positive. It wasn't until I started to focus on finding a balance between following a budget, having fun, and exploring ways to increase my income that my life began to show signs of changing for the better.
Here's the ultimate 5-step for how to build real wealth and actually enjoy your life.
1. A Scarcity Mindset Keeps You Stuck
The Scarcity Mindset
Your worldview shifts to a scarcity mindset when your only focus is on cutting costs. You see every dollar as something to hold onto tightly rather than as a tool.
A scarcity mindset fuels fear. Year fear not having enough. You begin to say no to everything: social events, small luxuries, personal development, and investing in the stock market.
A scarcity mindset adds unnecessary stress and isolates you from others. A scarcity mindset makes you poor. You believe that you're being "responsible" with your money even when it would be better to find ways to increase your income.
You avoid small costs that could benefit you. A scarcity mindset makes you focus on the short-term rather than the long-term impacts of building true wealth.
Cultivate An Abundance Mindset
You must consciously flip the script in your brain. An abundance mindset isn't about pretending money grows on trees. An abundance mindset is about believing in your ability to earn more of it. An abundance mindset focuses on opportunity and growth.
Start by changing what you tell yourself about money. Replace "I can’t afford that" with "How can I afford that?" This simple shift forces your brain to look for solutions and opportunities instead of just seeing barriers.
Strategic Spending
Practice strategic spending with an abundance mindset. Be frugal on things that don't matter to you: name-brand clothes, cable, and news subscriptions.
You can then be generously frugal for those things that matter the most to you: gym membership, digital courses, and attending networking events. You're directing your money towards things that can positively change your personal and financial life.
You can use money as a tool to build your best life.
Mindset Is Your Foundation
Your mindset is the foundation of every financial decision you make.
A scarcity mindset keeps you small, fearful, and stuck. You'll miss every opportunity that comes your way with a scarcity mindset.
An abundance mindset empowers you. An abundance mindset reduces financial anxiety. You'll be open to new ideas, side hustles, business ideas, and conversations with an abundance mindset.
An abundance mindset allows you to create and design the life you want for yourself. A scarcity mindset only keeps you stuck where you're at.
Key Point: Train your brain to see opportunities to earn more and increase your net worth.
2. Being Overly Frugal Leads To Burnout
Frugal Burnout
You eventually run out of willpower. You cannot push your way through a joyless existence forever. Extreme frugality is bland, unsatisfying, and unsustainable.
Extreme frugality leads to what's known as "frugal fatigue" or "frugal burnout."
You feel deprived. You become resentful. You become miserable for months. You finally hit a breaking point. You go on a big spending episode that decreases all of your savings goals, overspend so you can't save, feel guilty, or feel defeated.
Frugal burnout results in a continuous cycle of restriction and rebellion that gets you nowhere.
Create A Sustainable, Joy-Filled Budget
Your budget isn't a punishment. The goal of a budget is to help you achieve financial stability and happiness. A sustainable budget allows you to enjoy the things that make you happy while staying within your budget. You can still go to your favorite activities or events. A budget isn't meant to make your life boring.
The simplest solution is to follow a "values-based" budgeting system, which follows the updated 50/30/20 budget.
The first 50% of your budget covers your essentials: rent, utilities, groceries, insurance, and transportation.
The second 30% is for paying off debt, saving, and investing.
Your final 20% is your fun money. If you want to pay down debt faster or invest more, you can allocate a percentage from the 20% toward the 30%.
Your fun money could be going out once or twice a month for happy hour. It could be buying a new video game or renting a movie to stream. Fun helps you to feel self-deprived
Your fun money helps you stick to your budget rather than stop. You reward yourself (within budget) so that budgeting does not become a miserable task.
Consistency And Personal Finance
Consistency matters in personal finance. Moderation will always beat an extreme plan you abandon in six months. A sustainable budget protects your mental health. A practical budget prevents destructive spending sprees and builds positive, lifelong money habits. Consistency and fun make your financial journey to building wealth enjoyable.
Key Point: Budget for fun to avoid burnout and make your plan stick for life.
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3. Scale Your Income
Ignoring The Income Ceiling
There is a maximum income ceiling that you reach when you only save. You can cut your expenses to zero, only for your necessities, but then you will have no life.
If you earn $3,000 a month, the most you could save is $3,000 a month. The problem is you still have bills to pay and errands to run, which cost money. You could save money by living with your parents rather than renting (they may still charge you rent at a discounted rate).
The problem is that when you try to maximize your monthly savings, it becomes painful to spend on toothpaste, gas, and appointments.
It's better to work to solve the problem, which is your income, rather than your savings. Frugality optimizes the money that comes in, while increasing your income raises the entire roof. Your net worth is the window that protects you from the elements.
Strategically Upskill And Increase Your Value
Your most powerful asset is your ability to earn. The single fastest way to change your financial situation is to make more money. The more money you earn, the more money you'll be able to invest in the stock market.
Learning high-demand and high-paying skills that will make you more attractive to employers or clients.
There are three main ways that you can upskill.
Identify High-Value Skills
Review the job posting and identify the required skills. Look for information on what type of software you need to know: Salesforce, Excel, or Asana. What skills routinely come up for the role you want to have, such as copywriting, data analysis, digital marketing, accounting, or public speaking?
Leverage Low-Cost Learning
You can learn almost anything online today for free or very cheaply. You can earn certifications online through a reputable platform or company. Use platforms like Coursera, LinkedIn Learning, YouTube tutorials, Teachable, and Skillshare.
Apply The Skill Immediately
Use your new skill at your current job or to grow your online business. Look for ways to improve a new product. Improve a process for your employer or company.
Taking action to apply it directly gives you experience. It's one thing to know something; it's an entirely different thing to use it in real life.
Monetize Your Value
You can now confidently ask your boss for a raise. You can cite your new skills, certifications, and contributions to the company. Or, apply for a better-paying job elsewhere that requires those skills. To raise your income ceiling even more, you can start your own business.
Supercharge Your Financial Life
Increasing your income helps you to supercharge every aspect of your financial life.
Saving 30% of a $50,000 salary is $15,000 a year.
Saving 30% of a $75,000 salary is $22,500 a year.
Saving 30% of a $100,000 salary is $30,000 a year.
Each salary increase allows you to save an extra $5,000 a year. That extra money that you can save and invest each year. Boosting your income gives you financial leverage.
Key Point: Investing in yourself by learning new in-demand skills is the fastest way to a higher salary and income.
4. Investing Beats Saving
Saving Is Not Growing
Saving your money in a savings account is a losing battle against inflation. Inflation is the value of your money depreciating over time. If your money earns 0.01% sitting in a regular savings account and 4.5% in a high-yielding savings account, but the real rate of inflation is 10% you are losing 5.5% or more each year. Your $100 is now only worth $90.
Saving money in a bank account doesn't protect it against inflation. Building wealth requires finding ways to make your money multiply and work for you.
Become An Investor
Investing is how you put your money to work. The stock market is a popular investment strategy for building wealth.
The stock market allows you to buy small pieces (shares) of companies. As these publicly traded companies grow and increase in value, so do the shares that you hold in them.
You don't have to be good at picking individual companies. Start out by investing in index funds and ETFs.
Index Funds And ETFs
Buying an index fund or an ETF (Exchange-Traded Fund) is a way for you to buy a basket of companies in various sectors. You'll gain instant diversification with index funds or ETFs. The diversification reduces your investment risk.
The earlier you start to invest, the wealthier you'll become. Develop a consistent habit of investing in the stock market. Set up automatic transfers from your bank to your investment account. You can then invest the money in your brokerage account by buying index funds and ETFs.
It's better to start saving small than not at all. Start by investing as small amounts as $5, $15, or $30 a week. The younger you start, the more money you'll have in your brokerage account for retirement.
Buy a stock or index fund as the price goes up or down. This is known as dollar-cost averaging, and it helps you to build wealth. The lower the price, the lower your total dollar-cost average will be per stock or index fund.
You grow your investments in the stock market through compound interest. Your investments will start to increase in capital appreciation to generate their own earnings. That's money you make without any extra work.
Engine Of Wealth Creation
Investing in appreciating assets is the engine of wealth creation. Assets that appreciate are:
Businesses
Commodities
Land
Real estate
Stockse
Owning assets helps you beat the real inflation rate while building wealth. Investing in appreciating assets is a non-negotiable for financial independence.
Key Point: Make your money work for you by investing in the stock market for long-term growth.
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5. Delay Joy Forever
Missing Out On Your Own Life
The time you have today, you'll never get back. Extreme frugality convinces you to delay your happiness for later. You don't know when you'll die and how much time you have left.
You skip going to happy hour to relax after a long day of work or to celebrate completing a project. You don't go to a concert when your favorite band is in town. You never take that weekend trip. You don't try a new hobby.
Missing out on the things you wanted to do (and had money saved to do) results in regret. You believe that your best years are passing you by.
What is the point of building wealth if you have no experiences, memories, or friendships to show for your journey? Money and wealth are the tools that give you access to them.
Audit Your Happiness
What are the activities that make you come alive and joyful? You may enjoy trying new restaurants. You may enjoy traveling. It could be playing board games or attending sporting events. Be specific about what exactly it is that makes you happy.
I enjoy going to happy hours occasionally. I like to relax with a cigar on the patio and contemplate life. Those are my two favorite things that make me happy.
Spend On Your Values
Now that you're prioritizing what brings you happiness. Only spend 20% of your budget on the activities you enjoy. Buy a bottle of wine. Go out to eat. Buy the ticket to that concert.
You can still be responsible and enjoy life while following a budget. You're designing your best life while staying within your budget.
Cut Costs On Everything Else
For everything else that does not make you happy, cut costs mercilessly. Do you really need a fancy car? You can buy a used and reliable model.
Do you really need thousands of TV channels? Stream free video content online.
Do you need to wear name-brand clothes? Buy the store brand.
Review your credit card and bank statements. Cancel subscriptions you no longer need.
Spend On Your Values
Now that you're prioritizing what brings you happiness. Only spend 20% of your budget on the activities you enjoy. Buy a bottle of wine. Go out to eat. Buy the ticket to that concert.
You can still be responsible and enjoy life while following a budget. You're designing your best life while staying within your budget.
Money = Hapiness + Security
Money is a means to an end. Money provides you with access to more ways of experiencing happiness. Financial security protects you from debt and stress.
Intentional spending lets you enjoy the journey to financial freedom. Intentional spending gives you motivation, prevents resentment, and creates a balanced, happy life where you can thrive today. You can continue building for tomorrow and retirement.
Key Point: Be ruthless with spending on things you don't love, so you can be generous with spending on things you do.
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Summary
Learn to work smart and manage your money well. Money management is how you build wealth. You can start to build wealth and enjoy life by:
Shifting your mindset from a scarcity mindset to a growth mindset.
Budget for fun as part of the updated 50/30/20 budget.
Master one high-paying skill.
Open a brokerage account with Fidelity, Vanguard, or Charles Schwab to start investing in the stock market.
Define your three"whys" for why you want financial freedom.
Stop just saving. Start earning. Start investing. Start living. Build a life that's rich in money and rich in joy. You can have both.
Disclaimer: This content is for educational, entertainment, and informational purposes only. This is not business, financial, investment, or any advice. I write online about topics that interest me. I make mistakes just like everyone else. Always conduct your own research and consult a professional before making decisions regarding health, life, finances, investments, taxes, or legal matters.