7 Strategies To Build Wealth on Minimum Wage

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When you’re making minimum wage, living paycheck to paycheck is often a reality. Even so, if you want to get ahead financially, you’ll need be willing to make sacrifices when it comes to your time and your money.

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“Building wealth on a minimum wage is undoubtedly challenging, but with disciplined financial habits and strategic planning, it is achievable,” said James Carlson, financial planner and certified digital asset advisor at Carlson Planning Co. “It’s about making the most of every dollar, prioritizing financial goals and staying informed about opportunities for assistance and growth.”

Here are seven strategies for building wealth on minimum wage.

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Follow a Budget

“The foundation of wealth-building, regardless of income level, is effective budgeting,” Carlson said. “Every dollar saved is a step towards financial security.”

Carlson said it’s important to track your expenses carefully and identify areas where you can cut back using free budgeting apps or simple spreadsheets.

When looking for areas to cut back, consider eliminating expenses for things that are nice but not necessary, such as new clothing, entertainment, dining out and streaming subscriptions. This doesn’t have to be permanent, but it is a way to help you make headway.

Next: 6 Ways To Build Wealth in Less Than 5 Years

Establish an Emergency Fund

Ryan Jacobs, the founder and managing partner of Jacobs Investment Management, LLC, said that an emergency fund acts as a financial buffer, safeguarding against unforeseen circumstances, such as medical emergencies or sudden unemployment.

“By setting aside a small portion of your income regularly, you can cultivate a sense of security, reducing your reliance on high-interest debt in times of crisis,” he said.

You don’t have to worry about having a large deposit to start an emergency fund. Jacobs said that starting small when building your emergency fund is OK.

“Even a modest amount, such as $5 or $10 per paycheck, can gradually accumulate into a substantial fund,” he said. “Automating savings can also ensure consistent contributions, gradually building a robust safety net over time.”

Reduce High-Interest Debt

At the same time you are building your emergency fund, you should prioritize paying off high-interest debts.

“High-interest debt, particularly from credit cards and payday loans, can be a formidable barrier in wealth accumulation,” said Jacobs. “Prioritizing debt repayment, especially for high-interest liabilities, can alleviate financial strain and enhance one’s capacity to save and invest.

“Approaches like the debt snowball or avalanche method can be effective in systematically reducing liabilities,” he continued. “Additionally, renegotiating terms with creditors or consolidating debts can also lead to more manageable repayment plans.”

Consider using the money you were spending on entertainment, clothing and dining out to help pay off your debt.

Take Advantage of Employer Benefits

“If available, participating in employer-sponsored retirement plans, especially those with matching contributions, is like receiving free money,” said Carlson. “It’s a powerful tool for long-term wealth building.”

It’s not uncommon for minimum-wage employers to offer 401(k) benefits to their employees. See if yours does.

Invest in Your Education

“Investing in oneself through education and skill development can yield substantial long-term dividends,” said Jacobs. “Pursuing vocational training, certifications or even online courses can enhance employability and potential income, thereby widening the scope for savings and investment.

“Many communities offer free or low-cost educational resources and job training programs. These can be invaluable for individuals seeking to augment their skills without incurring significant expenses.”

You can also find plenty of free financial education information online. However, make sure you’re using a reputable source.

Community Resources and Programs

“Explore community resources and government programs designed to assist those with lower incomes,” said Carlson. “These can include food assistance programs, utility bill subsidies and tax credits.”

One example is the government’s Low Income Home Energy Assistance Program.

Earn More Income

“In today’s digital age, the gig economy offers a plethora of opportunities for generating additional income,” said Jacobs. “Engaging in part-time work or freelance assignments can supplement one’s primary income, accelerating the wealth-building process.”

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This article originally appeared on GOBankingRates.com: 7 Strategies To Build Wealth on Minimum Wage