It is likely no secret that many of us aspire to achieve a life full of prosperity and financial freedom. While money is certainly not everything, it does provide one with options and is a tool that, if used appropriately, can allow for a plentiful life.
If you’re also on the path to abundance and find yourself aiming to build wealth for yourself, then these key tips are for you:
Automate Your Savings
We all know how important it is to save money but actually taking the time to set aside these funds can be awfully difficult to do, especially when there are far more tempting ways to use this money. So – how do you actually save money when it is so easy to forget, spend, or repurpose the funds in your account? The answer is simpler than you think: automate your savings.
Most banks allow their customers to set up automatic transfers from their checking to their savings accounts in order to meet savings goals. If you’re not currently automating your savings, log on to your bank account, visit your local branch, or set up an account on Capital One 360 to ensure you take advantage of this feature. Remember, every little bit counts. Start small (if need be) and gradually increase the amount or frequency of your transfers over time. You’ll be glad you did!
Reduce high-interest debt
Not all debt is bad, certainly, but the kind of debt that costs you a substantial amount of interest? That should be avoided like the plague. We’re talking about those credit card debts (and other high-interest loans) that are charging you anywhere from 15-30% in interest each time period. To reduce the amount of your paycheck that actively goes to paying interest each month, aim to do the following:
If you have outstanding debts, first ensure you are making the minimum payments for all accounts. Then, arrange your debts from highest interest rate to lowest. For the highest interest rate debts, aim to pay as much as you can each month (i.e. credit card bills), and continue making minimum payments on all other debts. Continue to pay off as much of your high interest rate debt as you can each month until that debt has been eliminated. Once you have eliminated the debt with the highest interest rate, turn your attention to the debt with the next highest interest rate, and so on. Strategically paying off your debts will allow you to minimize the interest rate impact over time and will positively impact your credit score.
*Pro-tip: if you do pay more than the monthly minimum, be sure to notify the lending institution that you are NOT pre-paying next month’s bill, but that instead, you’d like the additional funds to apply towards the principal of the loan. If you don’t notify them, they’ll assume this extra payment is for next month and will hold it for then, giving you no break on the interest paid or due.
Live within your means
It is very easy to compare your life to the ones you see splashed all over social media or even in your own neighborhood. It can get tempting to attempt to “keep up with the Joneses”, so to speak, but just remember that everyone has their insecurities and their financial priorities. What may be important for you might look incredibly different for your neighbor. Instead of trying to be on top of the social scene, focus your attention on being the best version of yourself that you can be and aiming to live a balanced life now so that you can reap the rewards later.
Stick to a budget
Budgeting can seem limiting to some individuals, but in fact, the opposite is true. Budgeting provides you with the ability to tell your money what to do instead of letting it control you. By implementing (and actually sticking with!) a budget, you’ll be able to achieve much greater peace of mind, plan for the future, and afford your present.
We suggest following the 50/30/20 method of budgeting:
- 50% of your income should go towards those necessary, fixed costs (i.e. mortgage, rent, insurance, groceries, loan payments, utilities, etc.)
- 30% of your income should go towards your “fun spending” (i.e. gym membership, dining out, entertainment/events, trips to the salon, etc.)
- The remaining 20% should fund your savings goals and investments
Invest as early as possible
Here’s the thing: investing is such an important tool for building wealth and providing for your financial future (if done responsibly) and YOU CAN DO IT.
At it’s most basic level, investing is a way to spend money with the hopes of earning a higher amount at the end. The idea of earning more money than you originally put in is what typically draws most people to make an investment. However, before you go withdraw all of the funds in your bank account and begin investing all that you have, make sure you are adequately prepared, have an established emergency fund, know your “why”, and understand the risks.
If, after serious consideration, you find room in your budget to begin investing…then GO FOR IT! Keep in mind that thanks to the magic of compound interest, even a little investment can go a long way. The key is to just get started. You can do it!
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