How to build wealth, even if you feel like you don't earn enough

Millennials are behind previous generations in terms of wealth creation, and data from an Insider Intelligence survey found that many millennials felt their income was holding them back from making progress financially.

Millennials were feeling the financial squeeze long before the pandemic hit our shores. Wage growth is non-existent, combine this with cost-of-living increases and ever-increasing property values.

When asked what would give them the most confidence in dealing with financial uncertainties, 28% of the total sample size of 2,020 said a higher salary, the most cited response behind having more savings (35%).

Many of us have the ability to save or invest, even on a small scale. Here are three strategies for saving more money, even if you feel like your income is too low.

Check your home loan savings

1. Include savings in your ‘spending plan’

Savings and spending are intertwined and every “spending plan” should start with a line item for savings.

Whether you want to build an emergency savings account or contribute additional funds to your Super account but feel that you don’t have enough disposable income to do so, try reversing your thought process.

Do a budget, begin by listing your nonnegotiable monthly expenses (food, housing, etc.) and add an amount for savings, a good number is 10 percent of your net income.

Subtract the total amount from your monthly income; whatever you have left over is truly disposable income. This way, savings are treated like a regular expense, and it won’t feel like you’re dipping into your fun money later. A quick way to do this is to use a free online tool like this budget planner.

If you’re left with nothing or end up in the red when you use this strategy to save off the top, it’s probably time to reevaluate what you consider necessary expenses. Chances are there’s room to make some cuts.

2. Automate savings and investments

Automatic transfers and deposits are two of the greatest tools in modern money management.

Decide once, perhaps at regular intervals, when to save (i.e., once a month or per pay cycle) and how much to save (i.e., $100 each time) and move on. It all but eliminates a decision-making process that is often fraught with emotion and procrastination.

If you’re working on building a home loan deposit, use the same strategy with your savings account.

3. Use cash injections wisely

If you’re lucky enough to get a tax refund, annual or quarterly bonus, or inheritance, these cash injections are perfect opportunities to bulk up your savings, just make sure you have a plan in place.

Think about the best way to use any extra cash you may get in terms of how it can be used to improve your finances. Perhaps half of it will go directly into a savings or investment account and half will go towards reducing any existing debts.

Whatever you decide, having a plan in place before the money hits your bank account will hopefully reduce the temptation to spend frivolously. It’s not often that you get additional cashflow injections, so do what you can to make the most of it.

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This article via Money Millennials does not constitute advice; readers should seek independent and personalised counsel from an appropriate trusted adviser that specialises in property, a tax accountant and property or interior design specialist.