Four Ways to Build Wealth Using a Budget

Budgets are one of the best ways to manage your money. Yet, many don’t like to take the time to put a budget together. And once they create one, they find it challenging to stay within it. But did you know that creating and maintaining a reasonable budget can help you build wealth?

Here are four ways to build your wealth using a budget:

#1: Create Realistic Goals That Focus on Your Desired Future.

Before you begin to build your budget, you must define how your future looks. For example, where do you want to retire? When do you want to retire? Do you want to buy a home? If so, when? Do you plan to help your children with college expenses? Do you want to take your family on a big vacation, such as a cruise or some other faraway location?

The more specific you can be in defining your goals, the more likely you’ll achieve them. If you’re currently living paycheck-to-paycheck, a budget becomes even more valuable in achieving your goals.

#2: Make “Savings and Investments” a Line Item in Your Budget – Not an Option.

When we create a budget, we focus on our expenses – groceries, entertainment and housing. But we tend to overlook one important line item – savings and investments. When you make them a line item, it elevates their importance.

While we may not see “saving” or “investing” as an expense (because we’re earning money), it should be an “expense” in your budget, so you make sure you do it. So, for example, if you want to save $50 from each paycheck, account for that in your budget. That money is now unavailable to use for any other purpose.

#3: Focus on Income Options to Increase Opportunities to Invest in Your Future.

A big part of any budget is determining your income and recording it. For some, this is an easy process – you earn a regular, dependable paycheck and enter that amount. But for those who work on commission, or freelance with more sporadic income, this is not as easy; however, it’s doable. Typically, those who fall into the last category will need to estimate a monthly average based on their history – just be conservative in your estimation.

You may see that your income doesn’t cover as much as you might think. After you take out insurance, taxes and housing payments, there may not be a lot left. If you feel you need to earn more income, you have a few options to consider: 1) seek different employment, 2) get a part-time job or start a side gig at home, or 3) spend less. It all depends on your goals, your stage in life and the opportunities around you. But don’t just say, “I can’t do it.” There’s always a way to accomplish your goals.

#4: Identify Financial Waste to Make Room to Build Wealth.

To build wealth, you must spend less than you earn. Remember, excessive spending is a wealth destroyer, not a wealth builder. Budgets are a great way to keep track of your expenses and live within your means. And the easiest way to make room to invest is to make cuts to things you spend your money on each month.

Look at categories where you can make cuts and then use that money to invest in your future. Maybe you don’t need to eat out every day or scale back your entertainment budget. You can even mix it up each month – one month, you cut back on groceries, and then next month, your entertainment. As you continue to manage your spending, you’ll find ways to pay down debt, freeing up even more money to invest.

The important thing is that you’re consistently looking for more ways to invest – and fewer ways to spend. By keeping investing as an integral part of your budget, you’ll begin to build your wealth. 

Get Started With a Financial Planning Expert.

While many people understand the value of creating a budget or setting financial goals, most don’t know where to start, or where they should invest their money. Pinnacle Bank has partnered with Highland Trust Partners, LLC, to offer our customers a comprehensive wealth management program addressing their needs. Our partners have more than 60 years of combined experience helping families and businesses with their finances.

Get started today with your financial plan and live your financial goals.