If you’re currently living beyond your means and have no additional money to put to work for you, you’ll never build wealth.

  1. Save on Vehicles. …
  2. Save on Shelter. …
  3. Don’t Buy Crap. …
  4. Save a Percentage of Your Income. …
  5. Work Hard Now. …
  6. Invest in Your Education. …
  7. Invest in Yourself and Your Marketing. …
  8. Venture into Entrepreneurship.

Building wealth is an essential question that’s crucial to our future, financial independence, and comfort during retirement. These tips will ensure you’re on your way to building a healthy financial foundation.

How to build wealth

At the core of all this talk about stocks, investing, savings, trading, and budgeting is a fundamental principle: You want to end up with more money than you started out with. In other words, to build wealth.

But building wealth isn’t just about having a few extra thousand dollars sitting around for your next vacation or even for something more serious, like a potential medical emergency. It also doesn’t mean becoming a multi-millionaire. Building wealth is about the rest of your life. It’s about creating a financial foundation that will ensure your financial comfort for life, including amassing enough wealth to live comfortably and happily through retirement.

So how does one go about building wealth? While there’s no foolproof formula and a lot of it varies from person to person, there are some fundamental tips that can help you develop strong wealth-building habits. Here’s how to get started.

1. Create a budget

Understanding how you’re spending your money and where you can cut back is essential to saving and growing your wealth. A budget may sound scary, but figuring it out requires you to identify two simple numbers: what’s coming in and what’s going out. Then it’s time to start budgeting. Figure out your fixed costs (rent, utilities, mortgage payments, health insurance, etc.) and start trimming from your variable costs (bar tabs, Chinese food deliveries, dog grooming, etc). Another great rule to remember for budgeting is the 50/30/20 rule, where you’ll aim to spend about 50% of your income on fixed items like rent, utilities, transportation, and so on; 30% on variable expenses; and 20% for financial matters such as saving and investing.

2. Pay off any high-interest debt

Debt is a sure fire budget killer. Not only does it balloon the longer it’s not paid, it’ll also eat away at any gains you make, ruin your credit, and delay your path towards building wealth. So paying off any high-interest debt (such as credit card debt) is an absolute priority and should be factored into your budget. Create a payment plan and stick to it. And while you’re at it, cut up those credit cards or hide them away and only use them in an emergency (and then pay them off right afterwards).

3. Build an emergency fund

Life happens. Someone gets sick. You lose your job. Your basement floods. This is where an emergency fund comes in. Your emergency fund should cover about 3-6 months of living expenses, and should be kept locked away somewhere. An appropriate place might be a savings account or a savings investment account.

4. Invest as much of your income as you can

Once you have an emergency fund set up, it’s time to start investing with any additional money you have. Remember the 50/30/20 rule we mentioned earlier? A perhaps less painful way to ensure that about 20% of your income is invested is to think of it as paying your future self. By putting money into long-term investments, it’ll work harder than it would be just sitting in a savings account, and you’ll also be benefiting from the magic of compounding. The money that you invest should go towards a long-term saving strategy, like retirement or your child’s college fund.

5. Reduce your living expenses where you can

This sort of piggybacks off the budgeting tip. Once you start trimming your variable costs, reducing your fixed costs can have a huge impact on the money you can save. Can you lower your rent by living in a cheaper neighborhood, downsizing your home, or perhaps getting a roommate? Can you finally learn to cook so you don’t end up ordering take-out curry every three days? Write down all the money you’re saving from making these changes, which brings us to the next point….

6. Avoid “lifestyle creep”

There’s a good reason why many people with millions in the bank still clip coupons. To avoid lifestyle creep. A terrible condition in which you automatically adjust your lifestyle up a notch in line with your new financial realities. Lifestyle creep is getting a raise and then upgrading to a luxury apartment, buying a hot tub, dining in best restaurants and treating yourself to a new car and getting everyone’s drinks at the bar. Try maintain the lifestyle you had before the influx of new cash. Instead, put the money away and try to maintain a lifestyle where you reduce as many unnecessary costs as possible. Next time you get a raise, tax refund or bonus: hide it away before you’re tempted to spend it on something useless.

7. Negotiate your salary

This is where you’ll need to be particularly proactive. Look at online data to see what others in your position and industry are being paid. Do some bedtime reading, make a list of all your work achievements and approach your boss with a request for a raise. Be sure to come armed with specific examples of why you deserve a bump in your paycheck. If you feel unsatisfied with what you’re being paid and negotiating does not work, it might be time to start looking for another job. Changing jobs often leads to an increase income.

Building wealth from nothing

Is it easier to start building wealth when your parents already had an investment fund set up for you before you could even pronounce “diversified portfolio”? Obviously. But just because you’re starting from zero doesn’t mean that you can’t develop and grow a financial foundation that’ll let you be financially independent and live comfortably in retirement. It just means you’ll have to be way stricter when it comes to things like budgeting and saving.

You’ll also have to get clever with building additional sources of income. Is there a particular skill you have? Do you have a collection of aggressively flared jeans you don’t want to wear anymore but could sell online to someone who’ll actually appreciate them? With a little bit of effort and ingenuity, you can find ways to build up additional streams of income. Another tip would be to start a second job, if you can handle the time commitment. Perhaps you could drive Uber or Lyft for a couple of hours on the weekends, or take on some freelance assignments on the side.