Unless you hit a big lottery jackpot (which you won’t), you’re most likely not going to get rich quickly. The majority of people who successfully build wealth do so by adopting good money habits and applying them to their every day lives. It doesn’t happen quickly, but thanks to saving more than you spend and the power of compound interest, your net worth will balloon.
Consider implementing these money habits in your life to build your net worth:
Ditch the daily purchases
A coffee here, a doughnut there…sporadic purchases aren’t a huge deal. But when those sporadic purchases become routine and automatic, it can become a big drain on your wallet. Pay attention to what you buy every day and see if you can get it cheaper. Brew your own coffee. Buy a box of doughnuts. Even packing your lunch instead of buying it every day could net you $250,000.
Cook at home
One of the quickest ways to save money is to stop eating out so much. Did you know that it’s normal for restaurants to mark prices up 500% on meals? Or over 1,000% on soda and alcohol? Why not buy the ingredients yourself and make the same meal at home? There are 794 million results when you Google “recipes” so don’t tell me you don’t know how to cook.
While you might not realize it, reading is one of the best money habits you can have. Warren Buffet says he spends about 80% of his days reading. In a study done of over 1,200 millionaires, one trait that was found in nearly all of them was a love of reading, from self-help books to autobiographies. In a different study, results showed that 67% of rich people watched less than 1 hour of TV per day compared to only 23% of poor people. It makes sense. You’ll gain more knowledge, have a richer vocabulary and will stay more mentally sharp. Drop the remote and pick up a book!
Investing at all is great but investing every week is better. Doing so on a regular basis is called dollar cost averaging and it’s the most effective way to invest. Instead of trying to time the market (which you can’t successfully do over a long period of time), you invest a fixed amount of money on a regular schedule. The advantage is that with a fixed amount, you’re getting more shares for your money when the market is down and possibly undervalued. You’re then buying fewer shares when the market is up and potentially overpriced. If you have a 401k plan set up at work, then you’re already doing this. But you can always invest further in an IRA (retirement), 529 (for education costs) or a regular brokerage account.
Look for deals
Some people take coupons to the extreme. While I’m not saying that you need to go crazy, you can definitely save significant bucks when you keep your eyes out for deals, especially on groceries. Check out newspaper circulars for the deals that week. Don’t have a subscription (or you’re too young to know what a newspaper is)? The Flipp app shows you all the weekly circulars for stores in your area. Plus it’s searchable too with digital coupons available. Don’t forget to use apps like Ibotta, Checkout 51 and SavingStar to get cash back on hundreds of groceries that rotate each week.
Make a shopping list
Simple money habits can sometimes be the best ones. When you go grocery shopping, specifically grocery shopping, you should always make a list and stick to it. When you map out your purchases ahead of time, you’re less likely to make impulse purchases and fall for the numerous tricks supermarkets use to get you to buy more. A list forces you to stay more disciplined instead of walking up and down the aisles grabbing whatever looks good.
Check your budget
The dreaded “B” word. Look, nobody really likes to budget, but you need to know where your money is going. You don’t even have to do a full-fledged “we can spend this much on food and this much on entertainment this month” budget (although it helps). At the very least, you should absolutely be tracking your spending. As with everything in life, there’s an app for that. Mint is probably the most popular, where you can link your financial accounts to get a full picture of your finances. Knowing where your money goes is the first step to identifying unnecessary expenses and cutting back.
Pay off your credit cards
I can’t stress enough how terrible credit card debt is. It has high interest rates, it builds quickly and in so many cases, it’s completely unnecessary. If you have the means, you need to be paying off your credit card balance in full every month. If you don’t have the means, you should take a closer look at your spending to see where you can cut back. The average household with credit card debt has a balance of over $16,000, paying almost $1,300 in interest per year. Interest is the price you pay to borrow money from credit card companies. It literally buys you nothing and is a wealth killer. In most cases, carrying a balance even offsets the cash back and point rewards the card offers. Paying off the balance is one of the best money habits you can adopt.
Balance your checkbook
Balancing a checkbook might seem antiquated with the rise in online banking, but it still is still important. The primary reason is to make sure you don’t overdraft your account. A balanced checkbook will show you any payments or checks that haven’t cleared yet. That will prevent you from incurring overdraft fees when trying to pull out more money than you have in the account. More generally, it helps you to keep an eye on your money and see where it’s going.
Check your investments
I’m mostly an advocate for hands off investing. “Set it and forget it” encourages you to automate deposits into an investment account so it takes the thinking out of it. But you don’t actually want to forget about it. You should check your investment accounts at least quarterly to see how they’re doing. Rebalancing quarterly has been shown to be most effective in maximizing returns. Make sure beneficiaries on the accounts are accurate (these supersede beneficiaries listed in your will).
Review your expenses
With so many bills coming in, it can be difficult to keep track of how much you’re spending on things. It’s important to take some time a few times each year to see what you’re spending on and where you can cut back. Are you using that gym membership? Are you subscribing to things you don’t need or use? Check to see if you can switch utility companies that would allow you to save on your bill. Call your cable and cell phone provider to see how you can lower your bill. A lot of them will work with you to keep you as a customer.
Pay extra toward debt
You’re not going to build wealth if you’re constantly in debt. You’re paying interest to the money lenders instead of paying yourself. The “minimum amount due” is not your friend. You can knock years off your mortgage and save tens of thousands of dollars in interest buy paying an extra $100 a month. Start with the highest interest debt first and throw extra money at it until it’s gone.
Increase your savings percentage
So you’re saving money. That’s great! But are you increasing the amount you save each year? Increasing your contribution by even 1% can make a huge difference in the long run thanks to compound interest. The best way to do it is by increasing your 401k contribution each year when you get a raise. That way, you’ll still see an increase in your pay while also socking away more for the future.
Increase your income
If you want to build wealth, you need income. Increasing income and adding more streams of revenue is one of the most important money habits of the rich. You’re not limited to what your company decides to pay you. Check Glassdoor, Payscale and Salary to see if you’re being paid appropriately for someone with your education and experience. If not, ask for a raise. There are also tons of side hustles you can pick up for extra cash. Better yet, build some passive income streams.
Bank the extra cash
Are you one of those people who spends their tax return or bonus before they get it? Well knock it off! Just because it’s unexpected doesn’t mean you need to blow through it all. Not that you shouldn’t have any fun with your hard earned money, but put some of it to better use. Throw it at expensive debt, build up a rainy day fund or max out a retirement account. Those are the types of money habits that may not seem like a big deal but pay huge dividends over time.