You’ve seen them on the covers of magazines and on TV and probably wondered, how do millionaires get so rich? You may think that their secret to building wealth is to make a large annual salary. That certainly is one way. However, there are many stories of hardworking people with modest incomes who left hundreds of thousands of dollars to charity or to their alma mater when they died.
These people prove that there is another way to build wealth and attain financial freedom, and it doesn't rely solely on a hefty salary or big bonuses. Even with a modest income, you can set aside money and help ensure a stable financial future by doing one simple thing: living within your means.
This simply means spending less than you earn, and saving and investing the rest. If you're living within your means, you have enough money to pay your basic living expenses, such as food, clothing, housing, and transportation, without going into debt by using credit cards or loans.
While you're in college, you may be tempted to charge your tuition or books to a credit card, with every intention of paying off the balance next month. Good intention, bad idea. If you can't pay the bill in full when it comes due, you'll owe interest in addition to the cost of the items you purchased. So, try not to use credit if you can avoid it.
There are some big-purchase expenses that generally require loans, such as buying a car or a house, but you shouldn't use debt to help you pay for everyday expenses. Paying for everyday items with debt limits your choices, because you're constantly paying for yesterday instead of moving toward tomorrow.
It can be challenging at first, but if you try to live within your means you’ll greatly improve your chances for a more successful financial future. Start by saving early—to benefit from the power of compound interest. And for added incentive, try this online calculator to figure out how long it will take you to become a millionaire.
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