Let’s chat about how to make the transition to wealth. The reason I know this discussion is necessary is because the transition hasn’t been easy for me. If I’m being honest, it’s been an awkward transition at times. During the ‘debt payoff’ leg of my financial journey, I became accustomed to using all of my discretionary money to make extra student loan payments.  It took a little over 5 years to pay off nearly $100,000 in student loan debt and weirdly enough I found myself a little lost after I made the final payment.

Was I happy to get that student loan monkey off my back? Absolutely? Was I prepared for the next phase of the financial journey?  Not so much. If you find yourself struggling with transitioning from paycheck to paycheck mode to wealth-building mode, then this discussion is for you.  

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How to Build Wealth After Living Paycheck to Paycheck

The first step is to do MORE mindset work.

I’m a huge proponent of money mindset work because 90% of personal finance is mindset and behavior, the other 10% is the actual dollars and cents. A healthy money mindset work is necessary because so much of how we operate with money (the way we save, spend invest) depends upon it.  

If you started out your financial journey coming from a place of scarcity or coming from a position of living paycheck to paycheck, making that transition to wealth can be rocky.  After spending years in debt and budgeting every single penny, you may now be afflicted by a scarcity mentality that prevents you from moving towards wealth. If you have a scarcity mentality and don’t address it properly, you could end up self-sabotaging your wealth-building efforts. 

I’m almost embarrassed to share this, but I will anyway. When I paid off the last remnants of student loan debt I floundered a bit. The next natural step was building an emergency fund. But for some reason, I didn’t get as excited about saving as I did about crushing debt. I had to take a few moments to do some soul-searching and figure out why that was the case.  I eventually came to the conclusion that I was stuck in ‘struggle mode’.  

In addition, some of the other mindset work that I recommend is dealing with your childhood issues as it relates to money. Many of us have unconscious, deep-seated money issues that we’re not aware of. A great way to uncover some of these is to start a money journal or use an existing journal to explore money issues. Write out your earliest experiences with money and how money was viewed in your house growing up.  And you will definitely start to get some breakthroughs through these simple exercises. And if you really want to go deep. Go to therapy. 

Next, create your own definition of wealth.

Simply take out a blank piece of paper or break open that money journal again, turn to a fresh page and write down the word wealth. Next, do a freestyle brainstorm on any words or ideas that come to your mind. For example, in my own life, wealth is all about having options. It’s about having the freedom to spend my time in ways that I enjoy.

It’s also about having health because, for me, wealth isn’t just about money.  

It’s about providing for my family while having time to spend with them as well. And of course, it’s about leaving a financial legacy to pass down to my own kids (and maybe even my grandkids). If I’m not able to accomplish these things, but I have a ton of money in the bank, I haven’t really achieved my own definition of wealth. 

Transition from a consumerism mindset to an ownership mindset.

Now, this is still more mindset work and it builds on number one, but I felt that this concept deserves its own number because it’s such an important part of building wealth. If you have new money or newfound wealth after growing up poor, the temptation is to live it up in an effort to make up for lost times. Typically this looks like purchasing status symbols in an attempt to show the world that we “made it “.

But as you make the transition to wealth the focus begins to shift away from depreciating assets and towards appreciating assets.  Instead of having our eyes fixed on the newest, most expensive luxury car out there, we’re now thinking about rental properties, Roth IRAs, and 401ks. Naturally, I enjoy the occasional Amazon splurge like any other girl. But one day I thought to myself, what if I bought a share of stock as often as I click the Amazon one-click button?  

Ladies, what if you owned a share of stock for every handbag and pair of shoes in your closet? Or what about a share of stock for every lipstick and eyeshadow in your makeup collection? How would that accelerate my wealth journey?

Set a BIG scary goal.

Now, this should be relatively easy for you if you have been on the journey to paying off a massive amount of debt. The advantage of being out of debt is that now your discretionary dollars can instead be used to save and invest. But psychologically after paying debt, it’s great to replace that completed goal with another ambitious one. By all means, give yourself room and space to just be and breathe if necessary. Enjoy your win and when you’re ready hop back in the saddle with a fresh goal.  

My current Big Scary goal is Project $100K

For you, the big scary goal may be to start the small business that you’ve been contemplating for years but never had the time (or money) to get off the ground. I challenge you to stretch yourself here. The goal should give you a tiny bit of pause. But push yourself, push the limits, push the boundaries, and come up with your next big scary goal. 

Start (or ramp up) investing.

Maybe up until this point, you’ve only been putting a tiny amount of money into your 401k or your 403 B, because you wanted to tackle debt first. But as you get close to that finish line of paying down that high-interest debt that you have, now you can take those dollars and have them work for you instead of using them to pay somebody else.  Some options for ramping up investing:

  • Increase 401k or 403b contributions
  • Open a Roth IRA
  • Open a taxable brokerage account and invest in index funds

The great news is that you don’t need thousands or even hundreds of dollars to start investing. It’s possible to buy fractional shares with an investing app like Stash with just a few dollars

Finally, protect the legacy.

An often overlooked aspect of personal finance is life insurance. Unfortunately, young and healthy people can pass away unexpectedly. If you contribute to your family financially and your family depends on the income, having life insurance is a necessary move. I know it’s not the most pleasant or sexiest topic in the world, but it’s a necessary one nonetheless.

Until you get to the point where you’re effectively self-insured (i.e. having multiple six figures of net worth or more plus tangible assets like paid off real estate) life insurance is a necessity. And a good term life insurance policy might not cost as much as you think. If you can afford to buy Starbucks coffee with fancy foam and milk, you can afford life insurance. Amazon, you can definitely afford life insurance. 

I hope the tips that I’ve shared today will help you smooth out that transition as you go from struggling with the budget and paying off debt to moving into a position to build wealth. The transition can be challenging, but it’s well worth it!

In the comments, share which of these tips resonates with you the most. And share your definition of wealth.

What does wealth look like to you?