Earning money and building wealth are two different animals: That fat paycheck you’re earning now won’t necessarily translate into living large during retirement. Short of a financial windfall—like a large inheritance or winning the lottery—you’ll need to make a conscious effort to spend and save wisely if you want to build wealth. Here are four tips to help make that happen.

A man using a calculator to build wealth.

Start Early

The expression “better late than never” may be true, but it’s certainly a lot easier to build wealth if you start early. There are several reasons for this. First and foremost is that you’ll make saving and investing a habit. If it’s a part of your routine from the time you start earning money, it will be easier to live without the money you’re setting aside. Starting early also sets you up to develop greater expertise in a wider variety of investment options—which means you’ll do a better job of putting your money to work. And, since you’re younger, you can sustain more risk, which inherently increases your ability to build wealth.

Starting early has another benefit: The power of compounding—what Einstein called the “eighth wonder of the world.” Compounding interest is the reinvestment of earnings, and it’s most powerful over time. Say you make a single $10,000 investment when you are 20 years old and it grows at a conservative 5 percent each year until you retire at age 65. Your investment would be worth $89,850 after 45 years of compounding.

Now assume you invest the same $10,000, but wait until you’re 40 to do so. With only 25 years for the investment to grow, it will be worth only $33,864 when you’re ready to retire. If you wait until age 50 to make the investment, you’ll be looking at only $20,789. Even though better late than never is true, sooner is better when it comes to building wealth.

Watch Out for Lifestyle Inflation

Lifestyle inflation can derail the best-laid plans for wealth building. Basically, people will spend more money if they have more money to spend. Consider this scenario: A young couple settles into an apartment for $1,000 a month. After a few years, they both have higher incomes so they decide to move into a different apartment that costs $2,000 a month. The first apartment was suitable—nice amenities, good location, great neighbors—but the new one is in a more exclusive neighborhood.

Even though the first apartment was fine, this couple traded up to a more expensive apartment—not because they needed to, but because they could. Lifestyle inflation compels people to spend more on everything—from homes, cars and clothes to vacations and private school for the kids—which unnecessarily diverts money away from wealth building.

Two big factors are at work here: Pressure to keep up with the Joneses (whether that’s your friends, neighbors or co-workers) and a sense of entitlement—you’ve worked hard for your money so you feel justified in treating yourself to better things. While there is nothing wrong with splurging if you have the resources to do so, rewarding yourself too much isn’t sustainable and is counterproductive to building wealth.

Make a Conscious Effort to Spend Less

Modern payment options like credit cards, PayPal, Apple Pay and Amazon’s one-click ordering make it easy to distance yourself from spending. As a result, many people regularly spend money on goods and services they don’t need. It’s important to acknowledge that every spending decision you make today affects your financial situation tomorrow. That expensive Gucci bag—or shoes, or concert ticket, or bottle of wine or whatever—you just bought is coming straight out of your nest egg. Can you afford to spend that much for that item? Even if you can, should you?

The point is to pay attention to where your money goes, and make a conscious effort to spend less whenever possible. Little things like coffees and going out to lunch add up, but so do all those monthly subscriptions (the gym, Netflix, cable, streaming music and the like). If you don’t use it enough to make it worth the money, cancel the service. Of course, big-ticket items matter even more, so make sure you ask yourself if this is something you really need, or if there’s a cheaper alternative (thrift store?) that will work just—or almost—as well.

Make a Commitment

Like any goal, building wealth takes commitment—complete with a plan and the dedication to follow through on that plan every day, even when it’s hard to do so. Consider the commitment of Olympic athletes. Only a few athletes from each sport get their shot at the Olympics, let alone a medal. Those who make it are the ones who have set goals, trained hard, made sacrifices and struggled through the inevitable ups and downs for years before representing their country in the Games. All long-term goals—whether it’s competing in the Olympics or building wealth—take commitment. Without that, you might get lucky, but what’s more likely is that you will never reach your goals.

The actual mechanisms you use to build wealth—the stock market, IRAs and other retirement accounts, real estate, collectibles and the like—will vary. But no matter which assets you employ, you’ll have a better chance of building wealth if you start early, avoid lifestyle inflation, work on spending less and make a commitment to your long-term financial goals.

Compare Popular IRA Providers

Provider Fidelity Investments Merrill Edge
Name Fidelity Roth IRA Merrill Edge IRA E*Trade IRA
Description Get a range of investment choices, tax advantages and 1:1 help with a Fidelity Roth IRA Learn More Get up to $600 when you invest in a new Merrill Edge IRA. Plus one-on-one guidance, actionable insights and easy-to-use tools. Learn More Invest for retirement at E*TRADE. Learn More