by Anne StClair

Created on: March 04, 2009

My grandfather used to have a saying: look after the pennies and the pounds will look after themselves.' You can replace pounds with dollars or euros, or any other currency you like, but the point is still the same, and that is if you waste the pennies you will never get rich. In fact, if you waste them, you'll probably struggle for life trying to keep your head above water.

There is some disagreement, of course, about what the term rich' means. For some people having ten dollars left at the end of the pay period makes them feel rich, while for others twenty million dollars isn't enough to make them feel rich. Therefore, the first step in achieving wealth or financial security is to decide exactly and specifically what it would take to make you feel rich. You can then work out strategies and a series of mini-goals that will signpost the way to wealth for you.

Regardless of your ultimate goals or what it will take to make you feel wealthy, it still comes back to the single dollar. If you make one dollar and spend $1.20, you will never be rich regardless of your definition or goals. To paraphrase a famous quote by Charles Dickens from David Copperfield: Annual income $20,000 annual expenditure $19,900, result happiness. Annual income $20,000 annual expenditure $20,100, result misery. The blossom is blighted, the leaf is withered, the god of day goes down upon the dreary scene, and - and in short you are for ever floored.'

The next step to wealth, after deciding what wealth means to you, is to make sure you spend less than one dollar for every dollar you earn, or in other words to live below your means. How much below your means you can afford to live depends on your income and your circumstances, but whatever your income, if you can spend less you will get ahead, one dollar at a time.

Spending less than you earn means you are saving money, and the next step towards wealth is to make those saved dollars grow and work towards making you rich, and that means seeking out ways to invest the money saved. Depending on the amount you can save on your income, this might mean higher interest fixed deposits in banks, treasury or bank bonds, or it could mean investing in rare coins or stamps, car park spaces as an investment, land, or an investment property, or any of myriad other types of investments. Anything that increases in value is a good investment because your dollars are growing and leading you on towards wealth. The more you save, the more you can invest, and the faster your savings will grow.

So how do you spend less than you earn? Simply by taking it one dollar at a time. Try using cash rather than credit cards, because the money then seems real, whereas credit card money does not. Examine every purchase, and keep track of your spending to keep the outgoings less than the incomings. Always take a list when you go shopping, buy only what you need, and never buy on impulse. (Using cash helps you avoid the impulse buys.)

Consider your large purchases carefully. Do you really need an expensive, electricity guzzling plasma TV? Do you really need a TV in every room in your house? (Do you need one at all?) Can you keep your car for another year or five or ten? Also consider your smaller purchases. Do you really need to eat out all the time? Do you need to buy bottled water? Do you really need yet another pair of shoes? Do you really need to buy new clothes? Can you take your lunch to work? Even driving more slowly can save up to 20% off your fuel bill!

There are many ways to save money on a dollar, and every penny you save can be used to work towards your wealth.

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