Building wealth does not just happen by chance. It requires you and your spouse to make daily conscious decisions that align with your future financial goals. Choose to stop living paycheck to paycheck and know that you deserve the peace that comes with financial security.

These 7 steps can help you start your journey.

Step 1: Set Clear Financial Goals

Decide what is important to you and your family. Do you want to save for your kid’s college? Pay off debt? Ensure you have enough money saved for retirement or even retire early?

Write these goals down. Make sure they are specific, measured, relevant, and time bound. Doing this will increase your chances of achieving them. For example, “We will save $200 in our daughter’s 529 account every month until she turns 18”. Choose short-term goals (paying off your $500 credit card debt) and long-term goals (saving for retirement). Revisit these goals periodically to ensure you are staying on track.

Step 2: Understand Your Current Spending Habits

Your habits define what you become. Each time you swipe your card, you are making a choice. If you tend to spend mindlessly, financial security is likely not in your future. However, you can only have a clear picture of your habits once you track them.

Before making any drastic changes, monitor what you are currently doing. There are many different apps you could use, or simply write it all down in a notebook. Once you’ve gathered your data, tease through your expenses and decide what is hindering you from reaching your goals. Cut out all the unnecessary spending.

Step 3: Create a Plan to Pay Off Debt

One of the biggest hurdles to becoming wealthy is debt. It weighs you down and eats away at your wealth-building potential. Getting rid of your debt frees up income that you can use in other, more important areas of your life.

Write down all your debt and the associated interest rates. Decide on a debt payment strategy such as the snowball method (paying off smaller debts first) or the debt avalanche method (tackling high-interest debts first). Stick to it, keeping in mind your ultimate goal.

Step 4: Create a Budget

You work hard for your money, so you should know where every cent is spent. A budget creates a roadmap for your journey to financial freedom. Though it may seem tedious to create one, doing so will help you become more intentional with your spending.

To build a budget, start by using an app or spreadsheet. List your total income after taxes and every important expense category: groceries, rent, utilities, savings, etc. To get an idea of how much you should allot to each category, open your bank account, and look at your history over the last few months. Take the average of how much you spent on groceries, utilities, gas, etc., and add that to your budget. Remember that you can change these numbers to fit your goal. The first budget you create will take some time. Once established, you can just plug in your numbers for the subsequent months. Stay consistent with your plan. You want to build wealth, don’t you?!

Step 5: Build an Emergency Fund

Even with the most well-planned budget, emergencies will happen. Are you prepared for that? Most Americans are not. Having an emergency fund will ensure that you can weather any storm.

Aim to save 3-6 months of your monthly expenses. Keep it in a high-yield savings account and don’t touch it until you truly need it (e.g., job loss, car problems, washing machine broke). Do not use this money for frivolous spending or if you happen to overspend one month. It is best to have this account at a different bank than your checking or normal savings accounts. That way, it requires extra effort to withdraw money from it.

Step 6: Invest

This step is vital to your success on this journey to financial freedom. Investing in the stock market is the simplest way to build wealth. It creates an opportunity for your money to make you money through compounding. You must be prepared to assume some risk, but the potential benefits are too good to ignore.

You are investing when you contribute to your company’s 401k plan, a Roth IRA, or a brokerage account. If your company offers a match, you would be crazy not to take advantage of it. That is free money! Or it is embedded in your compensation package, so you’re doing yourself a disservice if you are not contributing. If you are in debt, at least get the match and focus on paying down your debt. Investing something is better than nothing at all. If you are debt free, consider maxing out your 401k and contributing to a Roth IRA and brokerage account.

Step 7: Review and Adjust Regularly

Once you have established a plan that works for you, reassess your progress periodically. Set a regular check-in schedule (monthly, quarterly, annually) to ensure you remain on track to reach your goals. Several wealth tracking apps will show your net worth and how it grows over time. Choose one and watch your progress. Nothing is more motivating than watching your debt decrease and your net worth increase!

Following these 8 steps will lay a foundation for your wealth building goals. They can make your chaotic financial situation feel less overwhelming and manageable. Commit to them and stay focused. Seek help if you need it. Start now, keep your head down, and work hard. Soon, you will look up and see the fruits of your labor.

Income vs. Net Worth: Understanding the Difference and Why It Matters

When discussing financial health, two key terms often come up: income and net worth. While these concepts are related, they represent different aspects of your financial picture. Understanding the distinction between income and net worth is crucial for making informed financial decisions and achieving long-term financial stability. Let's dive into the details of each and explore why they matter.

What is Income?

Income refers to the money you earn regularly from various sources such as your salary, business profits, investments, and other forms of revenue. It is the cash flow that supports your daily expenses and lifestyle. Common sources of income include:

• Salary or Wages: Regular earnings from your job.

• Business Profits: Money generated from owning or running a business.

• Investment Income: Earnings from investments such as dividends, interest, or rental income.

• Side Hustles: Additional money earned from part-time jobs or freelance work.

Key Characteristics of Income:

1. Regular Cash Flow: Income is usually received on a consistent basis (monthly, bi-weekly, etc.).

2. Supports Lifestyle: It covers your living expenses, including housing, food, transportation, and entertainment.

3. Variable: Income can fluctuate based on changes in employment, business performance, or investment returns.

What is Net Worth?

Net worth is a measure of your overall financial health and stability. It is calculated by subtracting your total liabilities (debts) from your total assets (everything you own). Assets can include cash, investments, real estate, and personal property, while liabilities might consist of mortgages, loans, and credit card debt.

Formula: Net Worth=Total Assets−Total LiabilitiesNet Worth=Total Assets−Total Liabilities

Key Characteristics of Net Worth:

1. Snapshot of Financial Health: It provides a comprehensive view of your financial situation at a given point in time.

2. Long-Term Wealth: Net worth focuses on the accumulation of assets and reduction of liabilities over time.

3. Financial Security: A high net worth indicates a strong financial position and the ability to withstand economic downturns or unexpected expenses.

Why the Difference Matters

Understanding the difference between income and net worth is essential for making sound financial decisions. Here’s why:

1. Financial Stability: While a high income can support a lavish lifestyle, it doesn't guarantee financial security. High net worth, on the other hand, reflects accumulated wealth and stability.

2. Sustainable Wealth: Building net worth through saving and investing ensures long-term financial health, even if your income fluctuates.

3. Risk Management: A robust net worth provides a cushion against financial risks such as job loss, medical emergencies, or economic downturns.

4. Goal Achievement: Focusing on net worth helps in setting and achieving long-term

While income and net worth are both important aspects of financial health, they serve different purposes. Income supports your current lifestyle and expenses, while net worth represents your long-term financial security and stability. By focusing on both increasing your income and building your net worth, you can achieve a balanced and prosperous financial future.

Remember, true financial success comes from not just earning more, but also managing and growing your wealth wisely. Prioritize both aspects, and you'll be well on your way to achieving lasting financial health and independence.