7 Simple, Free Moves Guaranteed to Make You Richer

Teenager counting savings

By Donna Freedman

Some of us think wealth is unattainable. Hard work is expected, but building a fortune isn't on our radar of possibilities.

We believe the rich will get richer, and the rest of us will stay right where we are — unless, of course, we slide backward.

But such pessimism is unwarranted. It may not happen overnight, but people of moderate means can and do leverage their dollars to build wealth over time.

The best news? Some of the most effective tactics for achieving wealth don't cost a dime.

Here are seven crucial steps to getting richer over time.

1. Set a goal

It isn't enough to simply say, "I want to invest in real estate." That's more of a pipe dream than a goal. You need to create a road map to get you from here to wherever it is you want to be.

For example, if you are considering investing in real estate, take concrete steps to learn more about what it will take to reach your goal. Such steps might include:

  • Educating yourself about the local rental market, such as learning about current vacancy rates and how much rent you can charge per month.

  • Determining how much money it will take to get your dream off the ground.

  • Figuring out how long it will take to set that cash aside.

  • Researching avenues that can help you achieve your dream, such as buying foreclosed properties at auction.

2. Create a budget

Create a budget that will get you to the goal you have set. Figure out how much you pay for necessities — a mortgage or rent, your monthly food bill, and other such costs — as well as optional purchases you make each month.

Then, subtract any extras — for example, keep basic cable but eliminate pay-per-view movies. Or, budget for a month's worth of groceries but drop all but an occasional night out for a restaurant meal.

Once you know your true expenses, subtract that figure from your take-home pay. That should give you a better idea of how much you will have available to save for your wealth-related goal.

3. Track expenses

Budgeting is important, but your spending estimates may not be as accurate as you think. Check your numbers by tracking expenses for at least one month. This will show you exactly where your money is going.

Once you start tracking your daily expenses, you might be surprised to find that $300 a month is dribbling away on small, inconsequential purchases — apps, lunches out, magazines, music downloads — that you previously overlooked.

Decide to cut such purchases in half, and you'll have an extra $1,800 a year for your wealth-building goals.

Our friends at PowerWallet can help you both track expenses and find ways to reduce costs. Note that this doesn't have to mean massive deprivation — instead, it is simply a smarter use of available funds instead of blindly pitching dollars at wants and needs.

4. Live below your means

Once you have a viable budget in place, stick to it closely as possible. Put any savings away for retirement or in another type of investment portfolio.

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This doesn't mean you can't ever have fun again. But you have to weigh the opportunity cost of each splurge. The more you live below your means now, the wealthier you are likely to become in the future.

5. Nix any debt

If you have money left over each month, you definitely should save it — unless you have debt. In that case, it often makes more sense to use any "extra" money to pay off current obligations instead of saving or investing it.

Remember, living according to the "minimum payment due" philosophy is guaranteed to keep you in shackles. Instead of merely paying the minimum, pay as much as you can toward your bills so you never have to pay interest again.

Once the debt is gone, your new budget should keep you from falling back into the red.

6. Negotiate ways to raise pay and lower costs

A powerful way to build wealth is to increase the amount of money coming in while decreasing the amount going out.

With that in mind, negotiate a pay raise. If possible, lay the groundwork now to get a raise in the new year.

Just as important, keep finding ways to lower expenses so you are squeezing more money from your paycheck. You'd be surprised what's potentially negotiable:

  • Medical care. Some doctors and dentists will give you a discount if you pay cash at the time of service.

  • Credit card interest. If you've been making payments on time and have a decent credit score, ask the cardholder to lower your interest rate. (And while you're at it, look for a better deal on a credit card — such as one that pays rewards.)

  • The cable bill. Call up the provider and ask for a lower rate. Emphasize your other options, such as switching to competing cable companies or dropping cable in favor of Netflix and Hulu.

7. Think past today's needs

Eventually, you will get used to the new, more frugal lifestyle. But even as you are basking in the glow of your savings success, it can be tempting to slip back into old patterns.

When that temptation arises — and it will — remember to think past today's needs, and to instead focus on tomorrow's wealthier future.

This is a crucial attitude adjustment. Stop thinking you have to have everything you want as soon as you want it. An "instant gratification" attitude is a huge impediment to building wealth.

Instead, continue to look for ways to trim expenses large and small. For example, since shelter is another huge chunk of most people's budgets, maybe it's time to look for a cheaper place to live. Other ways to save include:

You don't have to live in a cardboard carton and subsist on cold oatmeal. But you do have to remember the opportunity cost of the dollars that leak from your wallet.

What are your favorite wealth-building tips? Share them in our Forums. It's a place where you can swap questions and answers on money-related matters, life hacks and ingenious ways to save.