Making it in life, in a financial sense, isn’t a matter of winning the lottery or saving pennies like a miser. Rather, like many goals, it can depend on developing good daily habits.
If you make small, incremental shifts in how you manage your money, you could grow your net worth significantly. These moves can be as simple as reviewing and trimming your recurring bills or bumping up your savings contributions a notch.
While you may not see your savings double overnight, you can get on a path to growing your wealth. Here are some ideas that can help put you on the road to a better financial life.
Key Points
• Review and cut nonessential monthly expenses, including unused memberships and subscriptions.
• Automate bill payments and savings to avoid fees and ensure consistent contributions.
• Increase retirement contributions by 1% to benefit from compound returns.
• Create multiple income streams through side hustles or gigs for financial flexibility.
• Pay in cash to control spending and avoid unnecessary purchases.
1. Reviewing Monthly Expenses
One of the simplest ways to improve your financial health is to take a closer look at how much is going in and coming out of your bank accounts each month and to then drill down into exactly where your money is going.
Make a list of how much you’re currently spending monthly on essential and nonessential items. You may want to list your nonessential expenses in order of priority, and then look for places where you could potentially pair back, or in some cases, completely eliminate the expense.
This might involve canceling inactive memberships and unused subscriptions, and/or re-evaluating your cell, cable and car insurance plans (do you have more bells and whistles than you need? Could you get a better deal elsewhere?). Or, you might decide to cook more (and get takeout less often) or make fewer trips to the mall.
Another way to knock down recurring bills is to do a little haggling. Sometimes all it takes is a phone call to get a provider to give you a better deal or to lower your rate. If you see a promotion going on from a competitor, for instance, you can always ask your company if they can apply that rate to your account.
2. Trying a 30-Day Spending Freeze
One quick way to change your spending habits is to put yourself on a one-month spending freeze, during which you stop spending money on anything that isn’t a must. When the 30-day freeze is over, you may realize that you didn’t miss some of the things you usually spend money on and find it easy to pare back.
If a full spending freeze seems too challenging, you might pick a single category (such as clothing or shoes) or a specific store to stay away from for 30 days.
To help stay motivated, keep track of the money you didn’t spend during your freeze and then put it to use paying down debt, starting an emergency fund, or saving for a downpayment on a home or other short-term financial goal.
3. Automating Every Bill
Automating your finances not only makes your life easier, it can also help boost your financial wellness.
Setting up automatic withdrawals from your bank account to pay all of your bills helps ensure those bills get paid on time. And, when it comes to improving your financial life, paying bills on time can have a pretty significant impact.
For one reason, it helps you avoid paying interest and late payment fees. It could also help you maintain good credit. That’s because a significant portion of your credit score is based on payment history. In fact, it’s weighted more than any other factor.
It could also help maintain your credit score. That’s because a significant portion of your credit score is based on payment history. In fact, it’s weighted more than any other factor.
Having a good credit score is important because it can help you qualify for the best interest rates on credit cards and loans, including a home mortgage.
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4. Putting an Extra 1% Towards Retirement
Even if you think you can always plan for retirement later, the sooner you start, the easier it will be to reach your savings goal.
If you’re not yet maxing out your 401(k) contribution at work (which takes money out of your paycheck before taxes), you may want to increase it by just 1%.
You likely won’t notice the difference in your paycheck. But given the power of compound returns (when you earn returns not only on your initial investment but also on any accumulated returns), that small increase can net more significant gains over time. You might also set up a timeline for when you want to bump it up another percentage point after you’ve gotten used to the 1%.
You may want to set up a timeline for when you want to bump it up another percentage point after you’ve gotten used to the 1%.
If you don’t have a 401(k) at work, you may want to look into opening an individual retirement account (IRA), keeping in mind that there are limits on how much you can put into retirement savings each year.
5. Paying in Cash
What is it about plastic that can make your brain think you’re not really spending money?
One way to curb unnecessary or mindless spending is to leave your credit cards at home and only carry the amount of cash you have budgeted to spend that day, or week. When you can literally see your money going somewhere, you may find yourself becoming much more intentional in the way you spend it.
It can also be more difficult to get into debt when using cash, which could, in turn, pay off later by helping you avoid high-interest credit card payments.
Recommended: The Envelope Budgeting Method: What You Need to Know
6. Creating Multiple Income Streams
You may not be able to snap your fingers and get a raise at work, but it might be possible to increase your income in other ways. A low-cost side hustle could be the answer.
For example, is there a way to turn one of your hobbies, skills, or interests into some extra funds? Maybe a favorite local business could use some help managing their social media account or designing or writing copy for their website. Babysitting a neighbor’s kids, cleaning houses, walking dogs, or running errands for an older person are also options.
Or, you might consider taking up a gig with flexible hours, such as driving for a rideshare company, delivering food, helping people with small tasks, or personal shopping through one of the many on-demand service apps.
7. Saying “No” to Monthly Fees
Unless you’re looking very closely at your bank statements each month, you might not even be aware of the fees your bank may be charging every month for your checking or savings accounts.
These could include service fees, maintenance fees, ATM fees (if you go outside their network), minimum balance fees, overdraft/non-sufficient funds fees, and transaction fees. Over time, those little dinks can make a major dent in your account.
“If you see that your bank is hitting you with one or more monthly fees, you may be able to cut your monthly spending by switching to a less expensive bank, or going with an online-only financial institution, which tend to offer low or no fees,” says Brian Walsh, CFP® and Head of Advice & Planning at SoFi
8. Making Savings Automatic
To start a savings routine, consider opening up a high-yield savings account, and then setting up automatic, monthly transfers from your checking account into this account. By having a set amount automatically transferred every month, you won’t have to think about (or remember to manually make) this transaction — it’ll just happen.
It’s perfectly okay to start small. Even small deposits of $20 or so will add up. Before long you may have enough for an emergency fund (i.e., three to six months’ worth of living expenses just-in-case), a down payment, or another savings goal.
9. Knocking Down Debt
Having too much debt can hurt your chances of achieving financial security. That’s because when you’re spending a lot of money on interest each month, it can be harder to pay all of your other expenses on time, not to mention grow your savings.
Getting rid of debt can have long-range consequences as well. If you can lower your credit utilization ratio, which shows the amount of available credit you are currently using, it could help you establish or maintain strong credit. And that, in turn, could make it easier to qualify for lower-interest loans and credit cards in the future.
While knocking down debt may seem like a mountain to climb, choosing a simple debt reduction strategy may help.
• The avalanche method: Put extra cash toward the debt with the highest interest rate, while paying the minimum on all the rest. When the most expensive debt is paid off, put that extra cash to
• The snowball method: Put extra cash toward the debt with the smallest balance, while paying the minimum on all the rest. When the smallest debt is paid off, put that extra cash toward the account with the next-smallest balance and so on, until you are done.
If you can qualify for a lower interest rate, another option might be to take out a personal loan that consolidates all those high-interest debts into one more manageable payment.
The Takeaway
Making it financially doesn’t necessarily mean bringing in a huge paycheck or coming into a windfall (although those things don’t hurt).
Financial wellness is more about being able to live within your means while saving. Making a few incremental changes, such as putting just 1% more of your paycheck into your 401(k) or siphoning off an extra $100 into a savings account each month, can slowly but surely help you build your net worth.
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FAQ
What is the 50-30-20 rule of money?
The 50-30-20 rule is a budgeting method that splits your income into three parts: 50% for necessities (such as rent and groceries), 30% for nonessential expenses (like dining out and entertainment), and 20% for savings and paying off debts. This approach helps you maintain a balanced budget, ensuring you cover your basic needs, enjoy your life, and save for the future.
What is the 70/20/10 money rule?
The 70/20/10 rule is a budgeting strategy that allocates your income as follows: 70% for monthly bills and daily spending, 20% for savings and investments, and 10% for additional debt payments or charitable donations. This approach helps you manage your finances responsibly, build wealth, and contribute to causes you care about, fostering a well-rounded financial life.
What is the 10-5-3 rule in finance?
The 10-5-3 rule in finance is a guideline for estimating returns on different types of investments. It suggests that stocks may average a 10% annual return, bonds around 5%, and cash or savings accounts about 3%. This rule helps investors set realistic expectations and plan their financial goals accordingly, though actual returns can vary based on market conditions and individual investment choices.
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