You can be wealthy even if you're not rich

Wealthy and rich are not synonymous. Rich people who spend everything they make or more are not wealthy. We've all read stories of celebrities who live in fancy mansions, practice conspicuous consumption on a large scale, and eventually have to declare personal bankruptcy. It is, alas, far too common for someone to inherit a large fortune as a young person and wind up homeless in middle age. Someone with a lot of money might be filthy rich, but only as long as the money lasts.

Wealthy and rich are not synonymous. Rich people who spend everything they make or more are not wealthy. We've all read stories of celebrities who live in fancy mansions, practice conspicuous consumption on a large scale, and eventually have to declare personal bankruptcy. It is, alas, far too common for someone to inherit a large fortune as a young person and wind up homeless in middle age. Someone with a lot of money might be filthy rich, but only as long as the money lasts.

Perhaps we have also heard of people who live comfortably but modestly, and spend their lives in jobs that don't pay well, perhaps even menial jobs, who leave astounding fortunes to charities in their wills. People who spend less than they make are wealthy no matter how little money they have. They have saved for emergencies and know the pleasure of giving and generosity.

With that in mind, however, it is impossible to build wealth and debt at the same time. Whoever wants to become wealthy must get out of debt and start saving. What's  more, they need to do both at the same time. That's easy enough to recognize but very hard to do. It will take a great deal of planning and determination. Fortunately, the process breaks down into into manageable steps.

First, you must be aware of what you spend. Your monthly bills are easy enough, but you also need to keep track of variable expenses like groceries, and particularly cash outlays like snacks

Second, you need make a plan to change some of your spending habits. Perhaps in the first step you were shocked to learn how much you poke into vending machines. Perhaps you discover that you can get along with a less expensive plan for phone service or television. Maybe you can plan your errands so that you put fewer miles on your car. Perhaps you can walk or take the bus some places and not use the car at all. Examine everything you spend money on and be very honest with yourself.

Third, calculate how much you save with your spending reductions and apply it to getting out of debt. Keep this in mind: if you pay only the minimum due on your credit cards, you'll never get out of debt! Pay the minimum plus the service charge, plus, as soon as possible, all of the new charges since the last time you paid.

Fourth, examine all of your debts (the mortgage excepted) and decide how much you can devote to debt reduction. Send enough every month to the smallest bill to pay it off as soon as possible. When that you're finished with that one, add the same amount what you were paying to the next smallest bill, and so on until you are out of debt.

Fifth, start to save, even if you can only manage five dollars out of every paycheck. With direct deposit, you instruct the bank to put most of the money into your checking account and some into your savings account. Once you're out of debt, add what you had been spending on debt reduction, or most of it, to your savings and investments

Once your savings increase and your debt does not, you have begun to build wealth. The more savings you have, the better prepared you will be for emergencies. You should also look for ways to give to some worthy cause. Among other reasons, regular giving can make you less anxious about money. See more details at How to Get Out of Debt and Build Wealth.