As we grow older in age, our priorities change in several ways. One of the biggest priorities for young adults is building wealth. When it comes to building wealth, people will give you different advice on how to grow your money. The common advice that you will hear is to invest your money in the stock market, real estate, or start your own business. These are all great ways to build wealth but, one less emphasized way to start building wealth is to control your spending.
What and Why?
Personal spending refers to the variety of ways money is used in your possession. History has shown us that even people that make tons of money can lose it all if they do not have discipline in their spending. Famous examples include Mike Tyson, Nicholas Cage, and MC Hammer. Controlling your spending is necessary based on the fact that most people have a finite supply of money (except Jeff Bezos:) ). The famous Warren Buffet said, “If you buy things you do not need, soon you will have to sell things you need.” Personal spending is a main component of your financial picture and if you lack discipline it can cause a world of headache. On the contrary, if you have a strong spending discipline it can help keep money in your possession, which you can use to invest in stocks, real estate, a business, or other wealth building assets.
How?
Methods to control your spending depends on your personal habits/preferences. It is common for people to cut back on spending on categories considered “wants” such as clothing, food (eating out), and entertainment. For example, I typically don’t overspend on clothes, so I focus on spending less on food (eating out). I have definitely spent tons of money eating out with Grubhub and in general because I didn’t feel like cooking, or got tired of cafeteria food. According to the Bureau of Labor Statistics, the average person under 25 years old spends $2,362 per year (roughly $200 per month). Currently, I shoot for around $30 per week eating out, which adds up to $120 per month ($1,440 per year). Now, while I don’t know exactly how much I spent before, it was around that $200 number. If I follow through and control my spending, that’s almost $1000 per year that I am keeping in my pocket which I can use more wisely to help build my personal wealth. Finding where to cut back spending varies by the person but the important part is recognizing overspending and adjusting to a more stable spending level. While having a personal spending discipline isn’t as glamorous as investing or creating a business, it can play a pivotal role in building your wealth!
Disclaimer: Thegrownwave.com is a personal finance blog, not a professional investment advisor. The content produced from the blog is provided for free and only for informational purposes. Thegrownwave.com does not and cannot promise the accuracy and reliability of any content in comparison to your individual circumstances.
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