Becoming rich is not complicated; spend less than you earn and invest the remaining amount. However, this simple philosophy can be quite challenging for many individuals, primarily due to the present consumerist culture. We are constantly bombarded with messages encouraging us to spend more as if this were the key to happiness.
While it is true that some people find themselves in debt for legitimate reasons, such as the current economic climate that presents additional challenges for low-income families and the middle class, inflation has made everything much more expensive. The high-interest rate has made borrowing much more expensive.
Improving our finances is always possible. By adjusting our mindset and making a few lifestyle changes, we can begin our journey to financial freedom and retire early. In this article, I will share some practical money moves that can be implemented immediately to achieve immediate results. I hope to inspire and motivate you to live below your means, break free from financial limitations, and live on your terms.
Shift your mindset
Making meaningful changes in life begins with oneself. It is an internal transformation that is reflected in our actions and behavior. You must change your consumerist mindset and adopt a frugal and intentional lifestyle to improve your financial situation. The first step towards financial stability is acknowledging that you must spend less than you earn. The more you can save from your income, the quicker you can achieve financial freedom and retire comfortably.
Since I started my financial journey, my philosophy has been to buy more of what I need and less of what I want. You waste time and money when you purchase something you don’t need. Firstly, you waste the time it took you to earn the money you are paying for that item. For instance, if an item costs $200 and you make $20 per hour, you are wasting ten hours buying it. Considering taxes, you might even have to work more than ten hours. Secondly, you waste more time maintaining that item and the space it occupies in your house. All these resources are wasted on items you don’t need, likely sitting unused in your home. How is this a good deal?
Many Americans are constantly upgrading to bigger houses not because their family is growing but to store material possessions. When I visit a friend’s house and see that they have an expensive car parked on the street because their garage is filled with belongings, I can’t help but wonder why they choose to live this way. It just doesn’t make sense to me!
You have to watch every one of your dollars and be smart about using it. Think long-term instead of short-term. Every dollar you invest will double in about seven years. Always consider if you truly need an item before buying it.
Pay yourself first
Saving a portion of your income is essential to secure your financial future. One way to do this is by enrolling in your employer’s 401K plan. If that’s not an option, consider opening a Roth IRA account. By investing after-tax money, you can enjoy tax-free growth on your investment. Whatever you choose, pay yourself first by setting aside money before you spend on anything else.
Automate your finance
Automating your finances can avoid a lot of headaches. For instance, automating bill payments ensures they are always paid on time. This helps to avoid late fees and also protects your credit score.
Also, automating your savings and investing can be an excellent solution for those who find it challenging to save money. Doing so eliminates the temptation to use the funds for other purposes. Additionally, automating your investment enables you to dollar cost average into the market, a strategy recommended by financial experts. A smoother average purchase price is achieved by purchasing when prices are low and high.
Plan your spending
Sometimes, we want to buy certain items, but it is not urgent. We can plan and budget for it, waiting for sales like Amazon Prime Day or Black Friday. In my household, we have items we know we will constantly buy, like toothpaste and soap. These items never change for us, so we stock up when we see a good deal. These practices save us hundreds of dollars.
Also, Amazon’s subscribe and save program is an excellent way to save money. This program works by scheduling regular deliveries of your selected items. For instance, you can set up your toothpaste to be delivered every month and receive a discount of five or ten percent on every delivery. Additionally, acquiring five or more products in one auto-delivery to a single address can save up to 15% on eligible subscriptions. This is a great way to save money on your regular purchases. I’ve saved a lot by doing this for years.
Make a list of all the items you use regularly. Then, estimate how often you purchase those items. Lastly, go to Amazon and schedule the delivery for each item. This will save you time and money!
For instance, every two months, I receive an auto-delivery subscription for a 20oz bottle of collagen powder, which lasts me about two months. I get a 10% discount on each delivery.
Avoid bad debt
Debt is one of the biggest obstacles to achieving financial success. It not only limits our income potential but also hinders our progress. Therefore, I strongly advise avoiding bad debt like credit cards and auto loans.
Since beginning my journey towards financial freedom, my top priority has been eliminating and avoiding debt at all costs. Paying interest is not an option for me, as it can harm my financial well-being. I use credit cards to take advantage of the points and cash-back rewards, but I pay the entire balance every month. If you struggle with controlling your spending, I strongly advise against using credit cards, especially with the current high-interest rates. If you need to borrow money, make a concerted effort to pay it back as soon as possible to minimize the impact on your finances.
Take advantage of investment opportunities.
Some opportunities arise from the ever-changing economy. For example, if you have extra cash, you can invest in treasuries or certificates of deposit and earn a return of over five percent. Additionally, when the stock market experiences a significant drop, you can purchase reliable stock index funds or ETFs at an excellent price.
My partner and I were saving money for a down payment on a house before the recent surge in housing prices. Unfortunately, the housing market has gone crazy, and prices have skyrocketed due to high demand and low inventory. While some people have been willing to pay exorbitant amounts to secure their dream homes, we have refused to overpay for anything and have kept our savings in the bank. Due to the increase in interest rates, we have decided to invest our money in short-term treasuries until the housing market cools down and presents us with a suitable opportunity to buy. We plan to continue doing this if the interest rates remain favorable.
To be able to accumulate wealth, you need to have cash. Therefore, start implementing these changes and focus on building your net worth. Eventually, you will have enough money to generate more income and won’t have to work.
