Wealth creation is something that many people think about, and they wonder what the most effective strategies are for achieving it. One method is to reduce expenses, though that is not what this piece will focus on. Rather, this piece will center on the much more interesting topic of making money work for individuals. It will delve into the practical and impactful steps one can take to enhance a financial situation, namely through investment decisions that one can control.
1. Spend Less Than You Currently Have
One of the most underrated strategies for boosting your finances is simply spending less. Many people shy away from the idea of reducing their standard of living, thinking it would take Herculean effort to do so, when in fact making even a few small changes can lead to large payoffs. For example, if you are in the habit of buying an overpriced coffee every day, stop. Brew your coffee and enjoy it at home. The difference is going to save you upwards of $200 a year.
Start your saving journey by looking at your budget. Find out where you can cut back. Don’t just concentrate on bill-paying; plan for some savings too. And if you haven’t had a raise in a while, consider asking your boss for one. Also, give some thought to making more money through a second job or some other means.
Explore different avenues to acquire additional funds. Part-time jobs and freelance gigs are a couple of common ways to accomplish this. For instance, money earned as a waiter or bartender can be substantial. If you want to avoid making a weekly commitment, consider providing child care on weekends. Additionally, consider this. If you want to earn more, you’ve got to work smart and invest your income wisely. Don’t just let the money sit in a checking account. Let that extra dough work for you.
2. Get Your Money to Work for You
Reaching the destination of “financial success” often depends on making your money work for you—actually accumulating capital and letting it earn a return and, ideally, letting a portion of those returns earn returns until you reach a point where you don’t need to live off your job or business for much of anything other than the pleasure of doing it.
Numerous people who achieve great wealth work for reasons other than necessity; they labor because they enjoy what they do. They are not miserable misers but rather cheerful capitalists who often redefine work to mean something else entirely. In fact, work is redefined and situated within the domain of enacting one’s value system—it’s an issue of ethics, not a question of making a living.
All earners have the option to fund a Roth IRA, and most certainly should, to the maximum permissible amount. Even if your income is too high to treat the Roth IRA as a deductible retirement plan, contribute to it anyway and think of it as a supercharged savings account. Once you make it past the gates of your 30s into your 40s, funding the account will increasingly be a necessary element not just of your retirement plan but also of your retirement cash flow, because at the same time that you’re doing this, you’ll also have to contend with the beast that is your kids’ college tuition.
3. Make Smart Financial Choices and Seek Assistance
Ensuring that your money works effectively requires making sound financial choices. In contrast, making unsound financial decisions can really set you back. Take, for instance, the all-too-common problem of credit card debt. When you allow it to accumulate, the impact on your financial life can be staggering.
Think about a person who puts $2,000 on a credit card that has a 19.8% interest rate and a $40 annual fee. If that person makes only the minimum payment each month, it could take them over 31 years to pay off the debt. In so doing, they would pay an added $8,202 in interest. This situation underscores the critical need for young adults to be mindful of debt, especially credit card debt, and to have repayment strategies in place.
Should you find yourself in debt, you can significantly cut the time it takes to get debt-free by paying twice your required monthly payment. Usually, if you can do this, you’re only a few years away from freedom—often less than three. Working your way out of debt is one of the best ways to secure financial stability.
Conclusion
To sum up, attained financial success doesn’t ask for anything complicated or for any kind of superior brainpower. It asks you to do the opposite of what most people do: Make small, conscious snips to your spending. Don’t live it up and let your money work for you! Make up your mind to ensure that every dollar you possess serves a motive, and you, with no shortcuts taken, will be hitting the target of financial success.
