Several years ago a book came out called "The Richest Man In Babylon" by George S. Clason. In it, this wealthy man shares the secrets of building wealth. One of the first tips he gives is "Commence thy purse to fattening". In English, that means start saving. Having a safety net of savings is one of the first steps to building wealth.

Start your savings plan with doing a comprehensive budget. Account for every dollar that comes in and goes out. You have to know specifically how your money is being used. Don't use any general spending or misc. categories. Make sure you pay everything that is necessary and take everything that is left and put it into savings. It is critical to have an emergency fund of at least $1,000 built up as quickly as possible. That is the barrier between you and debt, and debt will kill any hope of growing rich.

Look at your spending habits and see what it is you can cut. Even if the savings seems small, over time everything adds up. Cut out things like Starbucks, McD's, HBO, etc. Do whatever you can to reduce your spending.

Look around your house for things to sell. Have a yard sale, go to a consignment shop, or list things on eBay, but sell whatever you can.

After you have built up your emergency fund, start taking every extra dollar you have and concentrate on paying off your debt. List all your debts from smallest total amount owed to the largest amount. Concentrate all your efforts on the smallest debt, and pay it off as quickly as you can. Make the minimum payments on all your other debts. As soon as the first debt is paid off, move on the the next smallest debt, and do the same thing. Concentrate all your efforts on one debt at a time until they are all paid off.

This might mean you have to get a second (or third) job. Do what ever it take to get rid of your debt. It may mean some big sacrifices for a while, but it pays off in the long run.

Once your debts are gone, start budgeting to put money regularly in some type of investment. If you have a 401(k) plan where you work, start contributing to it. If not, look into a Roth IRA. Look for a mutual fund with a 10 year average return of at least 12%. Put your money in and leave it. If the fund you have chosen isn't doing as well as you would like, you can move it to a different fund, but don't take the money out of the account. Keep contributing to it, and let the interest build. If you can afford to invest as little as $200 a month, in 30 years you will have nearly $700,000 in your account. If you can push that up to $300 a month, your IRA will have grown to over $1 MILLION!

Build up a savings account, and stay out of debt. That will free up enough money so you can invest in your future. It really pays off.

Learn more about this author, Jim Smoot.
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