First Person: Accumulating Wealth on Less Than $30,000 a Year

Yahoo Contributor Network

When I first began to build a modest amount of wealth, I only made an annual salary of $28,000. One of the secrets for reaching some level of financial success was realizing that I could accumulate wealth on any paycheck. It was simply a matter of living below my means.

Through the years, my salary increased. However, I did my best to keep my spending in check. I kept my expenses low so that I would have more money leftover every month to save and invest.

Getting out of debt

It was easier to build wealth because I dug myself out of debt. With no credit card bills, I was able to use my entire salary toward rent, utilities, gasoline and necessities as well as for my retirement and emergency savings. In order to get out of debt, I worked extra hours and took on extra work. By temporarily boosting my income, I rid myself of more than $50,000 worth of student loan and credit card debt.

Paying cash for everything

Instead of relying on my credit cards, I used cash to pay for everything. I knew I couldn't build wealth if I just get paying off debt only to get into more debt or by keeping a revolving credit card balance. I also didn't have to worry any more about identify theft or losing my credit cards.

Automating my savings

The easiest way for me to build up a modest retirement account of about $100,000 was to have 20 percent of my income automatically deducted from my paycheck and funneled into my 401(k) plan. I also had money transferred from checking to savings. After my retirement account balance reached $100,000, it then plummeted when the stock market crashed. I could have easily given up on my aspiration to become wealthy. However, I kept contributing as much as I could into the retirement plan.

Pretending to be broke

Every time my employer gave me a pay raise, I pretended as though I still made only $28,000 a year. During the recession, I didn't need to pretend to be broke since I received pay cuts instead of pay raises. However, my salary never dipped down to below the $30,000 mark again. I just kept my budget the same so that I could save more for the future.

Buying a home

Another way I built wealth was by buying a home without worrying too much about whether it was a "good time" to buy. I had a higher interest rate when I purchased my condo. Since I was making only $28,000 at the time, I went for the 30-year fixed rate at 7 percent because that's all I could afford. Once I began making more money, I switched to a 15-year rate mortgage, which happened to come with a much lower interest rate of 2.75 percent. Like many people, I had negative equity in my home for several years. By sticking it out, I was able to build equity. I now have about $35,000 equity in my house.

While I will need much more money to retire in another 25 or 30 years, I know it's possible to have a comfortable retirement since I started saving in my 20s and became a homeowner as soon as I could get approved for a mortgage.

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