Ready to achieve millionaire status without a cent to your name? Let’s kickstart your journey with these 15 genius strategies. Each step brings you closer to your goal, building wealth through dedication and strategic moves. It’s not just about money, but the lessons learned and connections made along the way that pave the path to financial success.
Create a Financial Plan
Craft a financial plan that charts your path to millionaire status. It’s not just a dream but a calculated strategy based on your goals and timeframe. Establish clear objectives and a roadmap to reach financial independence.
Positive Mindset for Success
Cultivate a positive mindset to unlock financial success. By fostering optimism and clarity, you empower yourself to manifest your aspirations with confidence. Maintain a can-do attitude to navigate challenges on the road to wealth.
To learn more: 125+ Money Affirmations to Attract More Money into Your Life
Start Saving – Even Small Amounts
Kickstart your savings journey with small but consistent contributions. Embrace mini-saving challenges that gradually accumulate wealth without disrupting your daily life. These incremental savings lay the foundation for financial independence.
To learn more: 15 Mini Savings Challenge Printables To Save More Money
Pay Off Debts ASAP
Prioritize debt repayment to accelerate your journey to financial freedom. Eliminating debt releases resources for wealth-building endeavors and boosts your net worth. Experience the transformative power of debt freedom on your path to millionaire status.
To learn more: How to Get Out of Debt in 5 Easy Steps
Find High Income Skills
Discover lucrative skills to boost your earning potential. In today’s dynamic economy, capitalizing on your abilities can open doors to additional income streams. Invest in developing valuable skills that align with market demands for long-term financial success.
To learn more: Top High Income Skills Without a Degree to Learn
Grow Your Income with Side Hustles and Entrepreneurship
Expand your earning capacity through diverse income streams. Side hustles and entrepreneurship offer flexible opportunities to leverage your talents and time, paving the way for financial abundance. Explore avenues to grow your income outside traditional employment.
To learn more: Find The Perfect Side Hustle for You
Learn Investing 101
Master the fundamentals of investing to build wealth over time. Unlock the power of compound interest and passive income by venturing into the world of stocks and investments. Equip yourself with the knowledge and skills to navigate the financial markets effectively. Don’t delay!
To learn more: How To Invest In Stocks For Beginners: Investing Made Easy
Adopt a Growth Mindset
Foster a growth mindset and learn from successful individuals. Embrace opportunities for personal and professional development to accelerate your wealth-building journey. Surround yourself with mentors and peers who inspire and challenge you to reach new heights.
Pick Your Community
Surround yourself with like-minded individuals committed to financial success. Build a supportive community that encourages wealth accumulation and mutual growth. Engage with peers who share your aspirations and values to stay motivated on your path to millionaire status.
Stay Debt Free
Maintain financial stability by avoiding debt traps. Free yourself from debt burdens to enhance your ability to save, invest, and accumulate wealth. Embrace a debt-free lifestyle that propels you toward financial independence and long-term prosperity.
To learn more: 7 Simplistic Habits Needed for Debt Free Living
Avoid Lifestyle Inflation
Resist the temptation of lifestyle inflation to safeguard your financial future. Balance increasing income with disciplined spending habits to maximize savings and investments. By curbing lifestyle inflation, you preserve resources for wealth-building endeavors.
To learn more: Avoid the Trap of Lifestyle Creep and Reach Financial Freedom
Take Advantage of Compounding Interest
Harness the power of compounding interest to grow your wealth exponentially. Let your investments generate returns that fuel further growth, accelerating your journey to millionaire status. Start early and leverage the magic of compounding for long-term financial success.
Focus on Your Long Term Vision
Cultivating a long-term vision is important to know what you are striving towards. Develop a comprehensive financial plan that encompasses savings, investments, retirement, and estate planning. Stay committed to your vision and adapt your strategy as you progress towards millionaire status.
To learn more: Host a Vision Board Party: Plenty of Ideas for Success
Take Immediate Action
Seize the moment and take proactive steps towards financial success. Avoid the pitfalls of procrastination by prioritizing saving, investing, and debt repayment. Embrace immediate action to overcome inertia and propel yourself towards your financial goals. Then, you will become a millionaire.
To learn more: How to Become a Millionaire with No Money
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Inside: Unlock the secrets to savvy spending with smart budgeting strategies. Explore techniques to stay within your financial limits and secure a stable future. Use these ways to ensure your budget works.
Budgeting isn’t just about crunching numbers – it’s a lifeline for your financial health.
Staying within set limits is essential because it helps prevent debt accumulation, allows for savings growth, and ensures that you’re prepared for both expected and unexpected costs.
You probably already know this, but you don’t like the idea of a budget! Especially when you need to know how to stop going over budget!
Think of a budget as a financial compass, guiding you through the sea of expenses without losing your way.
Quick Overview of What Smart Budgeting Entails
Smart budgeting is the smart play in the financial game, where you make your money work for you, not against you.
This involves understanding your income, neatly categorizing expenses, and planning ahead to ensure you spend less than you earn. By doing this, you create a buffer zone for saving and investing.
It’s a balance of discipline, foresight, and savvy financial planning that aligns with your unique lifestyle and goals.
Below, we will have tips on how you can ensure you don’t go over your budget.
Top Tips to Stick to Your Budget
1. Set Clear Financial Goals to Guide Your Spending Choices
Setting clear financial goals is like planting signposts along your fiscal journey. They guide your spending choices and keep you motivated.
Whether it’s a dream vacation, a new car, or an emergency fund, specific targets make it easier to resist needless spending and ensure every dollar is bringing you closer to what you truly want. Remember, a well-defined goal is a milestone waiting to be reached.
Check out the top smart financial goals!
2. Know Your Income
Understanding precisely how much money you bring home is the bedrock of smart budgeting. This is how to calculate your annual net income.
If you are planning to spend more money than you make, then that is a huge red flag.
You have to plan to budget less than your income. Knowing these numbers is crucial; it ensures that your budget is built on solid ground and not in financial quicksand.
3. Create a Realistic Expense List
Time to be realistic about what you spend. Look at your bank accounts and credit cards to know what you are truly spending and where.
Start by listing all your fixed costs such as rent, utilities, and insurance.
Then, add estimates for variable expenses like groceries and entertainment.
Be honest and avoid underestimating these costs; if anything, overestimate slightly to give yourself some wiggle room. This transparency with yourself prevents unpleasant surprises and helps cement a budget you can truly live with.
4. Adopt Zero-Based Budgeting to Allocate Every Dollar
Zero-based budgeting is like giving every dollar a purpose before it even hits your wallet.
With this strategy, your income minus your expenses should equal zero, which means you assign every dollar to savings, investments, or expenses. This meticulous approach ensures that you don’t have any money aimlessly floating around, which reduces the temptation to splurge.
Zero-based budgeting is the ultimate financial organizer, making sure no dollar goes to waste. One of the popular budgeting methods to use!
5. Practicing the 24-Hour Rule to Avoid Emotional Spending
Emotions can often lead to budget-busting spending sprees. However, by practicing the 24-hour rule, you combat those impulsive urges.
This is one of the simplest ways I don’t go over budget.
When you feel the temptation to make a non-essential purchase, commit to waiting a full day before taking out your wallet. This pause allows you to consider if the item is a necessity or just a fleeting desire. Reflecting on your financial goals during this cooling-off period often leads to wiser decisions and consistent, long-term savings.
6. Automate Savings and Bill Payments to Prevent Oversight
The marvels of modern banking can turn you into a financial ninja with minimal effort. By automating your savings and bill payments, you rid yourself of the worry of manual oversight.
It’s as simple as setting up automatic transfers to your savings account right after payday and scheduling auto payments for recurring bills.
This ensures your financial commitments are met before you even think of discretionary spending, keeping your savings plan on track and your credit history spotless.
It may take a few months for your budget to start working.
7. Embrace the Envelope System for Controlled Spending
The cash envelope system takes budgeting back to basics with a tactile and visual approach.
By dividing cash into envelopes labeled for different spending categories like groceries, entertainment, or eating out, you create a physical barrier to overspending. Once an envelope is empty, that’s your cue to stop spending in that category.
It’s straightforward yet powerful; the tangible aspect of seeing cash dwindle provides a stronger cue to curb spending than swiping a card ever could.
8. Utilize Apps and Online Tools for Regular Budget Review
These platforms make regular budget reviews less of a chore and more of a seamless part of your daily life.
Track your expenses in real-time, receive alerts when you’re nearing a budget limit, and gain insights into your spending habits with just a few taps on your screen.
This tech-savvy approach to budgeting not only simplifies the process but also empowers you to make informed decisions about your money on the go.
Find the best budgeting apps on the market today.
9. Mindful Spending Techniques
This is when you question the value proposition and encourage you to think before you buy.
Start by questioning the necessity and value of the item.
Will it enhance your life or clutter it?
Is this on social media as the “must-have” item?
Do you truly need it? Or is it a want?
Will the constant barrage of new items increase your happiness?
Also, practice gratitude for what you already own to minimize the allure of new purchases.
Mindful spending isn’t about deprivation; it’s about making more room in your life for financial peace and the things that truly matter.
10. Altering Lifestyle Choices
Altering your lifestyle to fit your budget might sound daunting, but it’s often the most effective way to ensure your spending doesn’t spiral out of control.
The first step is to be mindful of lifestyle creep.
Make mindful modifications like dining in more often, choosing staycations over expensive holidays, or opting for public transport over a personal vehicle. These changes don’t have to feel like sacrifices; view them as trade-offs for a more stress-free financial future.
Embracing a lifestyle that aligns with your budget paves the way to a richer (pun intended) life. Yes, debt free is the new rich.
11. Dealing With Unexpected Expenses Without Breaking the Bank
You turn around and are hit with an unexpected expense. It is the worst and I know something we deal with on a yearly basis at least.
Dealing with unexpected expenses can feel like navigating a financial minefield. To handle these without breaking the bank, initially aim to establish a rainy day fund with at least 10-20K of cash investments.
Start small, if necessary, and grow this fund over time. Should an unexpected expense arise, you can dip into this fund instead of derailing your budget. It’s your personal financial cushion, softening the blow of life’s surprises without causing a monetary meltdown.
12. When to Adjust Your Budget for Income and Lifestyle Changes
Life never sits still, and neither should your budget. If there’s a change in your income — maybe a raise or a job loss — it’s time to adjust your numbers. Similarly, lifestyle changes like a new family member or a big move call for a budget review.
Revisiting your budget whenever these changes arise ensures it remains tailored to your current circumstances. A budget that reflects your present situation is not only more realistic but also more sustainable.
The goal is to increase your savings percentage with any extra income coming in and forgo lifestyle inflation.
13. Keeping a Miscellaneous Line in Your Budget for Surprises
Life’s full of surprises, and some can hit your wallet unexpectedly. Keeping a miscellaneous line in your budget is like having an umbrella for a rainy day.
Set aside a small pot of money within your budget for these unforeseeable instances. If a surprise does pop up, you can cover the cost without dipping into other savings or spending allocations. This strategic buffer grants you financial flexibility and peace of mind.
Also, this can be used as fun money when times are tight.
14. Tracking Progress and Celebrating Small Wins
A budget is a living document, but it’s also a tapestry of your financial victories.
Tracking your progress is not just about ensuring compliance; it’s about recognizing and celebrating the small wins.
These accomplishments, such as paying off a credit card or sticking to your budget for a full month, build momentum and reinforce positive habits. Celebrate these successes—they’re the stepping stones to your larger financial dreams.
Plus, they’re great morale boosters that motivate you to keep going!
15. Find an Accountability Partner to Keep You in Check
Enlisting an accountability partner is like having a co-pilot on your financial journey. Choose a trustworthy friend or family member who understands your goals and is willing to help you stay on course.
Share your budget, your triumphs, and even your slip-ups with them. They can offer support, celebrate your victories, and gently nudge you back on track when needed.
Your accountability partner is a powerful ally, turning the often solitary act of budget management into a shared and sociable success story.
Frequently Asked Questions (FAQ)
To quickly create a budget you’ll stick to, use a reliable tool like YNAB to map out your income, essential expenses, savings, and discretionary spending for the next month. By clearly seeing where your money should go, adjusting as needed, and monitoring your progress, it becomes easier to adhere to your financial plan.
Keeping it simple and realistic from the start is the best foundation for budget commitment.
You might be exceeding your budget due to unrealistic limits, impulse purchases, or unexpected expenses. Prevent this by creating a realistic budget on what you already spend and creating a buffer for unanticipated costs.
Consistency and flexibility in your approach are key to staying within budget.
Accommodating irregular income requires a bit of foresight.
Start by budgeting based on your lowest-earning month to create a conservative baseline.
Save during higher-income periods to smooth out the leaner ones.
Continually adjust your spending priorities as your income fluctuates.
Also, maintain an emergency fund and categorize expenses by necessity to build a budget that’s both resilient and flexible.
Automated payments are a game-changer for sticking to your budget. They ensure bills and savings get paid first, reducing the risk of spending what you intended to save or forgetting due dates.
Setting up automatic payments may take a few hours and a few months to verify all of your bills are paid. But, something that is worth you doing.
Automation takes the guesswork out of financial commitments and helps you maintain a consistent savings habit.
How do I make sure I don’t go over my budget?
You are afraid to budget because you know you will go over your budget, right?
That mentally needs to change.
To ensure you don’t go over your budget, embrace the psychological trick of setting your spending plan slightly below what you can comfortably afford.
Convince yourself that this lower threshold is your maximum capacity, and any overages will merely tap into your deliberate buffer rather than causing financial strain. For example, if your income is $5000 per month, then budget $4000. That way you have a buffer to be (hopefully) saved at the end of the month.
This mindset, coupled with regular tracking, thoughtful spending, and strategic adjustments, can keep your finances firmly in the green.
One step closer to becoming financially stable.
Know someone else that needs this, too? Then, please share!!
Did the post resonate with you?
More importantly, did I answer the questions you have about this topic? Let me know in the comments if I can help in some other way!
Your comments are not just welcomed; they’re an integral part of our community. Let’s continue the conversation and explore how these ideas align with your journey towards Money Bliss.
The number of people living paycheck to paycheck is rising, and not just among low-income workers. One-third of Americans with an annual income of $150,000 or more are struggling to pay their bills and have no money left over for savings. Reasons for this include high housing costs, a lack of financial literacy, and lifestyle creep.
So how do high earners end up living paycheck to paycheck, and what can you do to break the cycle?
What Does Living Paycheck to Paycheck Mean?
Most people expect to earn a “living wage.” The term refers to an income sufficient to afford life’s necessities, including housing, food, healthcare, and child care. That level of income should also allow you to save for an emergency, retirement and other goals to some degree.
When a person lives paycheck to paycheck, they can barely pay basic bills and have nothing left over to save for a rainy day. In the event of a pricey emergency — like a big medical bill or major car repairs — low-income families are financially wiped out.
High earners have more wiggle room. They have the ability to downsize their home or car and find other ways to cut back on expenses.
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Understanding the Paycheck-to-Paycheck Situation
According to a 2023 survey conducted by Payroll.org, 72% of Americans are living paycheck to paycheck, with Baby Boomers the hardest hit. When you are living paycheck to paycheck, as noted above, you have no ability to save. If you go into debt, you may not be able to afford to pay down the debt in a meaningful way.
According to research from MIT, the average living wage for a family of four (two working adults with two children) in the U.S. in 2022 was $25.02 per hour before taxes, or $104,077.70 per year. Compare that to the federal minimum wage of $7.25. Even in Washington, D.C., which has the highest minimum wage at $17, families make well below what is considered an adequate income.
But even households bringing in $200,000 or more say they feel the crunch. According to a Forbes study, 39% of those earning at least $200K described themselves as running out of money and not having anything left over after covering expenses. While they have the freedom to downsize their lifestyle, many people may not realize the precariousness of their financial situation until they’re locked into a mortgage and car payments they cannot afford.
Why Do Some Americans Live Paycheck to Paycheck?
The reasons why Americans live paycheck to paycheck vary. For lower-income workers, you can point to a higher cost of living and wages that have not kept up with inflation. For those with higher incomes, the issue is more about a lack of financial literacy and living beyond one’s means.
Rising Cost of Living
According to the Federal Reserve, 40% of adults spent more in 2022 than they did in 2021. They spent more because monthly expenses, such as rent, mortgage payments, food, and utilities had all increased.
Low Income
Low incomes are another reason some people live paycheck to paycheck. This is particularly the case for people who earn minimum wage or live in areas with a high cost of living.
Poor Budgeting
Another reason some people are living paycheck to paycheck is that they lack basic financial knowledge and budgeting skills. It’s easy to overspend and accumulate credit card debt, but difficult to pay down the principal and interest. 💡 Quick Tip: When you have questions about what you can and can’t afford, a free budget app can show you the answer. With no guilt trip or hourly fee.
Lifestyle Creep
Also known as lifestyle inflation, lifestyle creep happens when discretionary expenses increase as disposable income increases. In plain English: You get a raise and treat yourself to a new ’fit. And a fancy haircut. And a weekend at a charming B&B in the countryside.
Whether you can afford it is debatable. On one hand, you may be paying your credit card bill in full each month. On the other, you’re not saving or investing that money.
Factors Driving Financial Insecurity for Six-Figure Earners
Because of inflation, it is increasingly hard to buy a home, car, and other nice-to-haves. However, people may still expect and try to afford these things once they earn a certain amount. And if they have a taste for luxury items, they may struggle to maintain that standard of living and pay their bills.
It’s common for people to buy things on credit and then find that they cannot make the payments. Soon, they find themselves mired in high-interest debt.
How to Stop Living Paycheck to Paycheck
You can stop living paycheck to paycheck by living below your means rather than beyond your means. That requires earning more than you spend and saving the difference. The obvious steps to take are to increase your income and to live more frugally.
Once you have downsized your lifestyle, you can find relief quicker than you might think. And some changes may only be temporary. For example, you might have to work a part-time job for a short time until your debt is paid off.
Tips for Those Living Paycheck to Paycheck
Here are some changes you can make to get on the path to living below your means.
1. Create a Budget
You have to know where your money is going before you can cut back. By tracking your expenses, you can see what you are spending where. There are lots of ways to automate your finances and make it much easier to stay on top of things.
Then, create a budget where you subtract your non-negotiable expenses, or needs, from your net income. Non-negotiables are your housing costs, utilities, food, and transportation. Hopefully, you have some money left over to allocate to savings. If not, it’s time to look at how you can make your life more affordable.
Here are a few budget strategies to try:
• Line-item budget
• 50/30/20 method
• Envelope method
2. Cut Back on Nonessentials
Budgeting will help you find expenses that you can eliminate or reduce. For example, look closely at things that might seem insignificant. You are not necessarily bad with money just because you lose track of subscription services that you have forgotten about.
Be aware that a large cold brew on your way to work every morning can add up, and eating out or spending $30 on takeout each week adds up to over $1,500 annually. More consequential changes are downsizing your home, accepting a roommate temporarily, or finding a part-time gig to supplement your income.
3. Pay Off Your Debt
Debt is expensive. High-interest credit card debt and buy-now-pay-later (BNPL) schemes can eat up your income as you struggle to pay the minimum while the interest mounts up. Consider using a personal loan to consolidate debt and reduce the interest you’re paying.
4. Save for Emergencies
If you are living paycheck to paycheck, just one unexpected expense can cause you to spiral into debt. It’s important to have enough cash on hand. Once you have paid off your debt, start an emergency fund so that you don’t have to rely on credit if you experience an unexpected financial emergency. A rule of thumb is to have three to six months’ worth of expenses saved up. 💡 Quick Tip: Income, expenses, and life circumstances can change. Consider reviewing your budget a few times a year and making any adjustments if needed.
5. Hold Off on Big Purchases
While you are trying to reduce expenses and pay off debt, hold off on buying big ticket items. For example, forgo an expensive vacation for a year and start saving toward next year instead. As much as you might like new furniture or a new car, try to economize for a while until you are in a better place financially.
6. Ask for a Raise
Asking for a raise is not an easy thing to do when money is tight. However, it could be well worth it. According to Payscale.com, 70% of survey respondents who asked for a raise got one. You are in a particularly strong position if your skills are in demand and your employer values you.
The Takeaway
Many Americans are living paycheck to paycheck, even high earners. The reasons why are linked to inflation, lifestyle expectations, and the ease with which people fall into debt. The remedy is to live below your means, and that often means making sacrifices.
If debt is a concern, temporary steps such as downsizing while you pay off your debt or finding additional sources of income are options. Identify where your money goes and stick to a budget to reduce unnecessary spending. Also, getting rid of high-interest debt and cutting back on eating out and other nonessentials can free up a significant amount of cash each month.
Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.
See exactly how your money comes and goes at a glance.
FAQ
Does living paycheck to paycheck mean you’re poor?
Living paycheck to paycheck does not necessarily mean that you are poor, but it does mean that you are living beyond your means. Even high earners can find themselves in a position where they are living paycheck to paycheck, often due to mounting debt and lifestyle creep.
Lifestyle creep is when people spend more whenever their income increases. According to a Forbes study, 39% of those earning $200,000 or more described themselves as running out of money and not having enough leftover to save after covering expenses.
Is living paycheck to paycheck stressful?
Yes. When you live paycheck to paycheck, you may constantly worry how you will afford to pay for an emergency. It’s important to have an emergency fund, so that you do not have to use a loan or high-interest credit card to pay for something unexpected.
How many americans are living paycheck to paycheck?
Close to 80% of Americans are living paycheck to paycheck and are struggling to meet their monthly bills, according to a 2023 survey by Payroll.org. That’s an increase of 6% from the previous year.
Photo credit: iStock/Jacob Wackerhausen
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Inside: Explore financial independence: Unveil why a debt-free life could be your path to riches, with practical strategies for lasting wealth without owing. Perfect for millennials or those new to managing money.
In an era where financial burdens weigh heavily on so many, adopting a lifestyle of debt-free living emerges as the modern epitome of wealth.
I’ve come to understand that true affluence isn’t just measured by the amount of dollars in your bank account, but by the freedom from the chains of debt. It’s not just about strict budgeting or cutting corners; it’s about the elevated sense of security and control that comes from owing nothing to anyone.
Encountering the peace of mind that accompanies a debt-free life has indeed propelled our financial well-being and moved us closer to our FI number.
But, the question for today, is being debt free the new rich, and the secret to true wealth. Let’s dig into that answer.
Debt-Free as the Gateway to Modern Affluence
In the past, wealth was often measured by the accumulation of material possessions and the perceived status they conferred.
Today, however, there’s a growing recognition that true affluence lies in financial freedom. Redefining wealth to include the absence of debt reflects a holistic understanding of prosperity in today’s economy.
Is being debt-free the new rich?
The question “Is being debt-free the new rich?” is more relevant than ever in a society enmeshed with credit and consumption.
Being debt-free signals a shift from traditional wealth, defined by material possessions, to a contemporary form of richness—one where financial stability and peace of mind take precedence.
Yes, being debt free will lead to increased wealth over time.
Debunking the Myth: Rich vs. Debt-Free
Many hinge their perceptions of wealth on income and assets without considering the crippling effects of debt. Being rich traditionally meant having substantial financial resources, but without considering debt, this view is incomplete.
Many individuals labor under misconceptions about living a debt-free life, believing it to be a goal that’s out of reach or mired in unrealistic sacrifices.
Let’s dispel these myths and highlight how a debt-free life is not only achievable but also a liberating choice that defies conventional financial norms.
Myth #1: You need a credit card to survive in today’s economy.
Many people believe a credit card is essential for building credit and making daily purchases. However, if you are unable to repay that credit card bill at the end of the month, then you shouldn’t use one.
Credit cards are helpful especially if you benefit from the credit card rewards. Many millionaires used the cash envelope system to get where they are at.
Myth #2: Student loans are the only path to higher education.
The notion that college is unaffordable without borrowing is widespread, yet there are numerous alternatives to student loans for funding education.
Learn how to get paid to go to school with scholarships, grants, work-study programs, and attending community college first. These are all viable strategies to pursue higher education without incurring massive debt.
Myth #3: Car payments are an unavoidable monthly expense.
Car payments are often accepted as a normal part of finance management, but it’s a myth that you’ll always have one. This one still makes me cringe – car payments are not considered normal.
By saving up and purchasing a reliable used vehicle, many can avoid the cycle of car loans, and even if a loan is necessary, paying it off quickly can relieve you from years of ongoing payments.
Myth #4: Debt is a necessary tool to achieve financial success.
Contrary to the belief that leveraging debt is how wealthy individuals build their empires, many successful people use debt strategically, if at all.
It’s possible to accumulate wealth through saving, investing wisely, and living within one’s means, all without relying on debt. Building wealth debt-free is slower but more stable and reduces the risks associated with borrowing.
Plus it increases the debt-to-income ratio.
Myth #5: Paying Off Debt is Too Hard and Takes Forever
Paying off debt utilizing strategies such as the debt snowball or avalanche method instead of waiting is crucial for several reasons.
Both approaches provide structured plans that create discipline, making it less overwhelming to tackle debt systematically. Paying off debts faster with these methods typically reduces the total interest paid over time, leading to significant savings.
Moreover, the quicker you become debt-free, the sooner you can redirect your income toward building wealth, saving for the future, or investing in opportunities. Finally, the psychological boost from witnessing debts disappear can be incredibly motivating, improving your financial confidence and relieving stress associated with high levels of debt.
Myth #6: Pointless to Pay Off Debt if Making More on the Money
Paying off debt can sometimes seem counterintuitive, especially if you’re making more on your money through investments or savings compared to the interest on your debt. While from a purely mathematical standpoint, it may make financial sense to keep the debt and grow your investments, the freedom from being debt-free transcends numbers.
However, the psychological benefits of not owing money—such as reduced stress, increased mental well-being, and the peace of mind that comes with financial security—often outweigh the potential financial gains from investing.
Debt can feel like a burden, and removing this can lead to a clearer mindset, freeing up mental energy and resources to focus on other aspects of life.
Myth #7: I’ll Be Broke Forever
Overcoming “I am broke” mindset to achieve debt freedom often requires a substantial shift in both behavior and perspective.
It involves breaking the cycle of living paycheck to paycheck and resisting instant gratification by prioritizing financial goals over immediate desires. Replacing impulsive spending habits with disciplined budgeting and intentional saving can be a challenging, yet empowering transition.
This transformation not only demands goal-setting but also a deep understanding that possessions do not measure true wealth but by financial security and the freedom it brings.
Myth #8 – Debt Won’t Limit Your Financial Freedom
Debt often acts as a chain that restricts monetary mobility.
Carrying debt means committing future earnings to past expenses, limiting the ability to invest in opportunities or save for unforeseen events.
True financial freedom can only be found when these chains are broken, unlocking the full potential to use your income to shape the life you desire. This is what you will learn here at Money Bliss.
Strategies for Achieving a Debt-Free Life
Achieving a debt-free life involves setting clear, attainable goals, exercising self-restraint to avoid unnecessary expenditures, and creating a focused plan of action to eliminate existing debts.
By embracing contentment and understanding that happiness isn’t tied to material possessions, one can redirect funds towards paying off debts, paving the way for a life with greater financial independence and security.
Tip #1 – From Calculating Debts to Making a Payoff Plan
Embarking on the journey to debt freedom begins with a clear assessment of your financial landscape. It’s essential to compile a comprehensive list of your debts, noting balances, interest rates, and minimum payments.
Armed with this information, constructing a tailored payoff plan becomes your blueprint to financial liberation. Taking this active step forward is where the climb back to solvency begins.
Tip #2 – Overcoming Social Pressures and Lifestyle Inflation
Social pressures and lifestyle inflation are formidable obstacles in the pursuit of debt freedom.
The urge to spend is often magnified by the fear of missing out (FOMO) and the desire to match others’ spending habits (aka Joneses). Overcoming these cultural norms is critical for individuals determined to maintain financial health and resist the lure of indebtedness.
Tip #3 – Budgeting, Saving, and Earning More
Budgeting is the roadmap to tracking and controlling your spending while saving ensuring you’re prepared for the future. Consider it carving a path to financial freedom.
Earning more, whether through advancement in your current role or side hustles, accelerates debt repayment. Balancing these pillars is key – spend wisely, save diligently, and earn aggressively to break the chains of debt.
Tip #4 – The Shift Towards Minimalism and Non-Materialism
A growing number of individuals are embracing minimalism, finding richness in life’s experiences over the accumulation of goods.
This paradigm shift from materialism to non-materialism spotlights the value of simplicity and intentional living. It’s a conscious choice to prioritize quality over quantity, creating space for financial freedom and personal growth.
Tip #5 – Investing and Saving: The Vehicles for Sustainable Wealth
Once debt is cleared, saving and investing become the twin engines driving the journey toward sustainable wealth. This is the #1 overlooked thing I see too often.
The idea of investing in stocks is overwhelming to too many; thus, you are doing nothing with your money.
A savings account offers a cushion against life’s uncertainties, while investments can grow your wealth exponentially over time. By harnessing the power of compound interest and diversification, you’re not just avoiding financial pitfalls but actively building your monetary legacy.
Tip #6 – The Necessary Sacrifices for Long-Term Gain
Achieving debt freedom often requires sacrifices that can test your resolve in the short term. I can attest to this over and over. But, then I see progress on my journey and I’m grateful.
Whether it’s forgoing a luxury purchase, downsizing your living space, or choosing a staycation over a lavish holiday, these decisions contribute to a greater financial objective. Embracing necessary sacrifices paves the road to long-term gain and a richer future, free from financial constraints.
Tip #7 – Leveraging a Debt-Free Status for Financial Growth
Living debt-free opens doors to financial opportunities previously blocked by loan repayments and high interest rates. You are focused on improving your liquid net worth.
This status can be leveraged for growth by increasing investments, acquiring assets, or starting a business without the drag of debt. It’s about transforming newfound liquidity into channels that foster wealth expansion and provide long-term financial security.
Real Stories: Transformations from Debt to Wealth
The tales of debt freedom resonate with hope and inspiration.
Imagine the relief of one less bill in the mailbox or the pride in finally owning your car outright. These personal anecdotes serve as powerful testaments to the life-altering impact of paying off debt.
Scott Alan Turner felt trapped by student loans for years, only to transform their financial narrative by dedicating extra payments to their debt and eventually questioning every single impulse purchase.
Each story underscores a unique journey of dedication, strategy, and eventual liberation that changes lives fundamentally.
The Ripple Effect on Families and Future Generations
Debt freedom not only transforms individual lives but also sends ripples through families and across generations.
Free from financial burdens, parents can invest in better education for their children, save for their own retirement, and instill the value of living within one’s means. Creating a new family legacy.
FAQ: Embracing a Debt-Free and Wealthy Outlook
Being truly debt-free means you have no outstanding financial obligations—no loans, no credit card balances, and no debts lingering over your head.
It reflects a clean slate of financial commitments, allowing for unrestricted use of your income and providing a robust platform for financial growth and security.
While happiness is subjective, studies consistently link less debt to higher levels of contentment. 1
People without debt often report a greater sense of peace and well-being, liberated from the anxieties and constraints associated with debt. Freeing oneself from financial liabilities allows for a lifestyle focused on experiences and personal fulfillment, factors known to enhance happiness.
It is generally advantageous to be completely debt-free, as it alleviates financial stress, increases disposable income, and contributes to a solid foundation for building wealth. Without the burden of debt repayments, individuals can allocate funds to savings, investments, or personal passions, enhancing their overall quality of life and financial stability.
Avoiding debt is often seen as countercultural because society promotes a credit-fueled economy, where debt is normalized for consumption and lifestyle enhancement.
Challenging this norm by rejecting debt goes against these ingrained beliefs, embracing financial independence and self-reliance over societal expectations and instant gratifications.
Freedom from Debts
Clearing up this confusion underscores the significance of being debt-free as a true indication of financial health and prosperity.
Embracing a debt-free life is not merely about financial stability—it’s about the profound sense of freedom and the joy that comes with it.
Being free from debt is your ticket to robust retirement savings, potentially leading to an earlier and more comfortable retirement.
The ultimate luxury lies in this liberty; the contentment from knowing you live within your means, free from the shackles of debt. Achieving this might require discipline, setting clear goals, and a commitment to self-restraint, but the payoff is unparalleled.
If this vision inspires you, why not start that journey to financial independence today? Each step, no matter how small, moves you closer to realizing your dreams without the weight of debt steering your course.
Now, the time is for you to become the next millionaire with no money.
Source
Motley Fool. “Study: The Psychological Cost of Debt.” https://www.fool.com/the-ascent/research/study-psychological-cost-debt/. Accessed March 14, 2024.
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Inside: Learn the roadmap to financial freedom with no money. Surpass debt, embrace millionaire habits, invest wisely & start a victorious journey to become financially independent!
Navigating the road to wealth can feel daunting, especially without a financial head start. But the journey to becoming a millionaire isn’t reserved for the lucky few with an inheritance at their heel.
It’s about strategy, perseverance, and making informed decisions.
Reaching the status of a millionaire is possible. I have done it and many other Money Bliss readers as well.
You have to change your mindset to make this happen. Becoming financially stable is of utmost importance.
Now, if you are serious about making seven figures in your net worth, then keep reading on how to do it.
Foundations of a Millionaire Strategy with No Money
Building a wealthy future from the ground up demands a strong and comprehensive financial plan. This isn’t something super fancy and you don’t need crazy knowledge.
You just have to start and be determined.
Step 1: The Essential First Steps Toward Financial Growth
Before plotting any course, assess your current circumstances candidly. Are you battling debts? Barely managing expenses? Or perhaps saving inconsistently? Acknowledging your starting point is critical.
A financial plan acts as your roadmap. It outlines not only your current standing but also sets the destination: your millionaire goal. This is not a figure plucked from thin air but rather a calculated estimate determined by your aspirations and timeframe.
Structure your plan to encompass these elements:
Income Assessment: Calculate your total annual income, be it from your primary job or any side gigs you maintain.
Expense Analysis: Track every expense. From the daily coffee to the monthly rent, understand where your money is going.
Debt Strategy: High-interest debts can cripple financial growth. Prioritize paying off these debts to alleviate financial pressure.
Savings Plan: Start with achievable goals. Perhaps saving $100 a month initially, then incrementally increasing as your earnings grow.
Investment Consideration: Every dollar saved should be working for you.
Ultimately, keep your plan documented and visible. Regular interaction with your strategy keeps the vision of financial growth at the forefront of your daily choices.
Step 2: Harness a Mindset Crafted for Success
Maintaining a positive mindset can significantly amplify your success with money, empowering you to manifest your financial ambitions with clarity and confidence.
This positivity helps to reframe financial obstacles as opportunities for growth. To cultivate this prosperous mindset:
Practice gratitude by acknowledging and appreciating what you already possess, which can create a sense of wealth beyond the monetary value.
Counteract negative thoughts about money by consciously redirecting them into positive money affirmations, reinforcing your belief in your financial acumen and capabilities.
Focus on your ultimate goals and align your behaviors accordingly.
Step 3: Starting Small: Saving with Limited Means
When funds are scarce, saving can seem impossible. However, even the most modest savings habits can blossom into significant wealth over time. The key is to start – no matter how small, and to remain consistent.
Implement these techniques to save effectively on a tight budget:
Automate Savings: Set up a direct deposit from your paycheck to a savings account.
Savings Challenges: Engage in one of my popular money saving challenges.
Save Raises and Bonuses: Save at least half of any raises, bonuses, or tax refunds you receive rather than increasing your spending.
Micro-Saving Apps: Consider using apps that round up your purchases to the nearest dollar and save the difference.
Saving is habitual. Even with a limited budget, adapting ways to make saving a consistent part of your financial behavior is crucial.
Start with a small percentage that won’t strain your daily living but will quietly accumulate in the background. These mini saving challenges are perfect!
Step 4: Handling Debt: Strategies for Minimizing Financial Burdens
Tackling debt is a pivotal stage on the road to financial freedom and accumulating wealth. Personally, this is exactly what happened to me. Once we paid off our debt, we were able to increase our net worth substantially.
Simply put… When debt is left unchecked, it can blossom into an insurmountable challenge, thwarting efforts to acquire wealth. The cash flow killer.
Consider these tactics to manage and minimize your debt:
Debt Audit: Begin by evaluating all your debts. Take note of balances, interest rates, and minimum payments. Understanding the total sum of your debts is essential for forming a repayment strategy.
Prioritize High-Interest Debts: High-interest debts such as credit cards can quickly grow beyond control. Prioritizing these debts for repayment can save you a significant amount in interest over time.
Debt Snowball vs. Avalanche: Choose the method that will keep you motivated and align with your financial goals.
Negotiate with Creditors: If you’re in financial hardship, reach out to your creditors to negotiate for lower interest rates or modified payment plans. Many creditors prefer to work out a payment plan rather than risk not being paid at all.
Avoid Accumulating New Debt: As you pay off existing debts, it’s crucial not to accrue new ones. Stick to your budget and avoid temptations that could lead to further debt.
Remember, every debt you free yourself from is one step closer to letting your money work for you, not against you.
Step 5: Identifying Skills That Pay: Turning Talents into Revenue
In the evolving economy, capitalizing on your skills can be a powerful way to generate additional revenue streams. The beauty of skill-based earning is that it can fit around a traditional job and can be scaled up or down as your situation changes.
Here are possible avenues to pursue:
Demand for Your Skills: Look at the market and find out if you can outsource your skills
Start Freelancing: Platforms like Upwork, Fiverr, and Freelancer can connect you with clients looking for your specific skillset. Begin with competitive pricing and build up your portfolio and rates as your experience grows.
Teach Others: If you’re knowledgeable in a particular area, consider creating an online course or conducting workshops. With platforms like Teachable or Udemy, you can reach a global audience.
Networking: Leverage social media, professional networking sites like LinkedIn, and community forums. This builds your professional presence and can lead to job opportunities.
Lastly, do not be afraid to ask for a pay raise. Thus, will help you fast-track your path to six figures.
Step 6: Side Hustles and Entrepreneurship: Growing Your Earnings
To build real wealth, especially with no initial capital, earning income from multiple streams can be a game-changer. Side hustles and entrepreneurship are about leveraging your time, talents, and sometimes minimal financial investments to grow your income outside of your primary job.
Almost every millionaire I know has a side hustle or business that helped them to get to that point.
Here’s how you can expand your earnings with side hustles and entrepreneurship:
Make money online: The fastest growing area is knowing how to make money online. Even seemingly mundane skills can be lucrative.
Choose the Right Side Hustle: You can choose to make money or chill and watch TV. Pick on the popular side hustles to get started today.
Start Small Business Ventures: Consider creating a small business. It could start as simple as lawn care services, homemade goods, or consulting. Validate your business idea with minimal investment before scaling up.
As financial expert and entrepreneur Ramit Sethi states, “There’s a limit to how much you can save, but there’s no limit to how much you can earn.”
By actively growing your earnings and establishing additional income streams, you accelerate your trajectory toward millionaire status.
Step 7: Investment 101: Basics for the Beginner Investor
Investing is the escalator to wealth, turning your savings into passive income generators.
For beginners, the world of investing can seem labyrinthine, but with foundational knowledge and strategic baby steps, you can begin to navigate it confidently.
Don’t be afraid of the stock market as you are giving up way too much money! This was the stupid mistake I made in my 30s. Now, my investment portfolio is the primary way I am growing my wealth today.
Here’s what you need to know to get started with investing:
Start with a Retirement Account: If your employer offers a retirement plan, like a 401(k), especially with matching contributions, take full advantage of it. This is often a beginner’s first, and potentially most profitable, investment.
Low-Cost Index Funds: As a beginner, it’s wise to invest in low-cost index funds, which are designed to mimic the performance of a particular market index. They are diversified and typically have lower fees.
Automatic Investing: Set up automatic transfers to your investment account to facilitate regular contributions without having to actively think about it. Don’t forget to select which fund to invest in.
Educate Yourself: Take advantage of online resources, books, and courses to understand the basics of stocks, bonds, and other investment vehicles. This is what I did – invest in my stock market knowledge and it has paid off big time!
Understand the Rule of 72: A simple formula to estimate the doubling time of an investment. For example, at a 7% average annual return, your money could potentially double every roughly 10 years.
Understand Risk vs. Reward: All investments carry some level of risk. Typically, higher risk could mean higher potential returns, but also greater potential losses. Assess your risk tolerance before investing and use those stop losses!
Investing isn’t a sprint; it’s a marathon with compound interest serving as the tailwind to push you forward over time. Learn how to invest in stocks for beginners.
Step 8: Retirement Accounts: Why Maxing Out Early Matters
By maximizing contributions to retirement accounts, you not only safeguard your golden years but also capitalize on tax-advantaged growth, which can be substantial over time.
Just because you are in your 20s or 30s, don’t say I’ll invest later. You are missing the boat.
Here’s why it’s beneficial to start maxing out your retirement accounts as soon as possible:
Compounding Interest: The earlier you start, the more you benefit from compounding interest.
Tax Benefits: Contributions to retirement accounts like 401(k)s and traditional IRAs are made each year, but they come with limits and potential tax-deferred (IRA) or tax-free (Roth IRA) accounts.
Employer Match: Many employers offer a match on 401(k) contributions up to a certain percentage. Failing to contribute at least enough to get the full match is akin to leaving free money on the table.
Higher Contribution Limits: The earlier you start maxing out, the less you have to play catch-up later. The IRS sets annual contribution limits, and consistently hitting those maximums can mean a considerable difference in your retirement savings over time.
By comprehensively engaging with your retirement accounts from an early age, you start an assured path towards the millionaire echelon.
Yes, it is possible to have multiple Roth IRA accounts.
Step 9: Adopting the Growth Attitude: Learning from Millionaire Mentors
The difference between those who accumulate wealth and those who don’t can often be traced back to mindset and mentorship. Adopting a growth attitude and learning from successful individuals can accelerate your path to prosperity.
Millionaires, with their experience and results-driven approaches, often provide valuable insights into effective wealth-building strategies.
Here’s how tapping into the wisdom of millionaire mentors can benefit your financial growth:
Learning from Their Experiences: Millionaires can share their triumphs and tribulations, offering you a roadmap that highlights what to do and what pitfalls to avoid. Cultivate these millionaire habits in your life.
Networking Opportunities: Millionaire mentors often have expansive networks. By building a relationship with a mentor, you may be introduced to key connections that can lead to lucrative opportunities.
Mindset Shift: Interacting with successful individuals can shift your perspective from a fixed mindset to one that embraces challenges, persists in the face of setbacks, sees the effort as the path to mastery, and learns from criticism.
Innovative Thinking: Mentors can inspire innovative approaches to income generation, investment, and savings. They can encourage out-of-the-box thinking that may lead to financial breakthroughs.
Emulating Success: By observing the habits and tactics of millionaires, you can emulate strategies that have proven successful while avoiding practices that may lead to failure. Start these billionaire morning routines to help you.
By adopting a growth attitude and learning from the insights and experiences of millionaire mentors, you sharpen your financial acumen and enhance your ability to create and capitalize on wealth-building opportunities.
Step 10: Community Counts: Surround Yourself with Success
The people you surround yourself with can significantly influence your thoughts, actions, and ultimately, your success. By intentionally building a community of hard-working, success-oriented individuals, you can foster an environment that promotes wealth accumulation.
Here is why it’s crucial to immerse yourself in communities that align with your aspirations:
Shared Success Mindset: In a like-minded success-oriented community, you’ll find individuals who have goals similar to yours and an attitude that is conducive to financial growth. This collective mindset can reinforce your own ambitions.
Peer Learning: Being a part of a community allows for collaborative learning. Exchange insights, experiences, and tactics with peers who are also on a path of financial growth. I love my masterminds!
Accountability: Just as with individual mentors, a community can keep you accountable. Regular interactions with people who take financial success seriously can encourage you to do the same.
Cross-Pollination of Ideas: Varied perspectives in a group can lead to a cross-pollination of ideas, sparking creativity and innovation in your own wealth-building strategies.
Increased Confidence: As you witness others achieving success, it instills a belief that you can do the same. This confidence can push you to take calculated risks that lead to greater rewards.
This adage stresses the importance of being selective with the company you keep, as their attributes frequently rub off on you, influencing your path to becoming a self-made millionaire. Likely you want friends who are millionaires or striving to be, too.
Step 11: Steer Clear of Debt: Remaining Unshackled as You Ascent
The gravitational pull of debt can be a formidable force, impeding one’s ascent toward the zenith of financial independence. But, you can overcome this by using these debt free living habits.
Here are strategies to remain unshackled by debt:
Budget Religiously: A budget constrains overspending and reduces the temptation to rely on credit.
Build an Emergency Fund: A substantial emergency fund can cover unforeseen expenses, diminishing the need to fall back on credit cards or loans that could exacerbate your financial situation.
Spend Less Than You Make: This may sound simple, but this helps you to live within your means and avoid going into debt.
Discern Needs from Wants: Be meticulous in distinguishing true needs from mere wants.
Ultimately, your ability to evade debt not only safeguards your financial stability but also amplifies your capability to invest and save, propelling you firmly on the trajectory toward millionaire status.
Step 12: The Lifestyle Inflation Trap: Keeping Expenses in Check
Success and salary hikes can often lead to lifestyle inflation, a phenomenon where spending increases as income rises, negating the potential for savings and investments. Keeping lifestyle inflation at bay is pivotal to ensuring that growing income translates into growing wealth.
Here’s how you can avoid the lifestyle inflation trap and keep expenses in check:
Stick to Your Budget: Even as your income grows, maintain the budget that facilitates your savings habits.
Identify Trigger Points: Be aware of what prompts you to spend more. Sometimes, seeing others upgrade their lifestyle can trigger the same desire. Stay focused on your financial goals rather than external influences.
Automate Savings Increases: When you receive a raise or bonus, immediately update your automatic transfers to increase the amount going into your savings or investment accounts.
Value Experiences Over Possessions: Studies have shown that experiences bring more lasting happiness than material goods. Opt for a modest increase in experiences rather than expensive goods as your income grows.
Embrace Minimalism: Adhering to minimalist principles can reduce the urge to accumulate non-essential items, keeping spending down and savings rates up.
Avoiding lifestyle inflation doesn’t mean living as frugally as possible regardless of how much you earn. It’s about finding a balance that allows for a comfortable yet modest lifestyle, wherein you can enjoy the fruits of your labor without compromising your long-term wealth goals.
Billionaire investor Warren Buffett exemplifies this principle by still living in the house he bought in 1958 for $31,500 and driving a reasonably priced car. Buffett’s lifestyle choices display an astute awareness of the perils of unnecessary spending and emphasize the importance of consistency in financial discipline.
Step 13: Compounding: The Wonder that Builds Big Balances Over Time
Compounding interest is a powerful tool that has the potential to turn modest savings into vast sums over time.
The principle behind compounding is straightforward: the returns you earn on your investments generate their own returns in the next cycle, leading to exponential growth given enough time.
Here’s how the wonder of compounding works to build big balances:
Start Early: The magic of compounding is maximized by time. The sooner you start investing, the more cycles of compounding your money can go through, and the larger your balance can grow.
Reinvest Your Returns: To truly harness the power of compounding, reinvest the interest, dividends, and any capital gains you receive, rather than spending them. This increases your investment balance, which in turn means more significant potential returns in the next cycle.
Regular Contributions: Make regular contributions to your savings and investments. Consistent additional deposits can significantly amplify the effects of compounding over the long term.
Step 14: Procrastination and Perils: Why Immediate Action is Crucial
Procrastination is often the thief of time and opportunity, especially when it comes to financial decisions. Postponing essential actions like saving, investing, or paying down debt can have compounding negative effects, making it harder to achieve financial goals.
Understand the perils of procrastination and the importance of immediate action:
The Cost of Waiting: In the realm of investment, the longer you wait to begin, the more you miss out on the potential compounding returns. Delayed action can mean the difference between a comfortable retirement and a financially insecure one.
Opportunity Loss: Procrastination can lead you to miss out on time-bound opportunities, such as market dips that are ideal for purchasing investments at lower prices or missing the deadline for a tax-advantaged account contribution.
Paying More on Debt: By putting off debt repayment, you accrue more interest, which only increases the total amount you’ll eventually have to pay. Acting quickly to pay off high-interest debt saves money in the long run.
Increased Stress: Delaying important financial actions can lead to an accumulation of stress and anxiety, which can, in turn, impair your ability to make sound financial decisions.
Potential for Rash Decisions: When you constantly procrastinate, you might eventually rush into decisions without adequate research or consideration, leading to poor financial outcomes.
Recognize this type of behavior and set weekly money meetings with yourself to help you move forward – one task at a time. Grab an accountability partner too!
Step 15: Long-Term Vision: Setting Up For Sizeable End Gains
The journey to becoming a millionaire is often a marathon, not a sprint.
Nurturing a long-term vision for your financial future is essential in guiding your daily decisions and motivating you to stay the course.
To ensure sizeable end gains, you need to establish and maintain a future-oriented mindset:
Set Long-Term Financial Goals: Establish clear, achievable long-term financial goals that align with your desired = future. Whether it’s attaining a specific net worth, owning property outright, or securing a comfortable retirement, these goals should inspire your action plan.
Strategic Planning: Develop a comprehensive financial plan that includes savings, investments, retirement accounts, and estate planning. This plan should act as a living document that you can adjust as your circumstances and goals evolve.
Patience is a Virtue: Recognize that wealth typically accrues over time, and not without fluctuation. Stay patient and avoid knee-jerk reactions to short-term market swings or temporary setbacks.
Regular Investments: Commit to making regular investments, even in small amounts. Over time, consistent contributions can result in substantial wealth through compounding interest.
It’s about creating financial disciplines that compound over time, ensuring that with each day, month, and year, you’re progressively building towards a considerable nest egg.
FAQ: Climbing the Financial Ladder Without a Silver Spoon
Getting rich with no money might seem like a paradox, but it’s a trajectory that many self-made millionaires have pursued successfully. The blueprint involves a combination of mindset shifts, disciplined financial habits, and strategic action.
You have to take proactive steps to increase wealth even when starting from zero.
Starting from nothing and achieving millionaire status requires a multifaceted strategy, encompassing personal development, financial planning, and an entrepreneurial approach to income generation.
Wealth creation is a journey, and starting from zero means that progress may be slow initially.
However, by adopting these steps and maintaining a disciplined and proactive approach, you incrementally increase your chances of accumulating significant wealth.
Ready to Become a Millionaire with Nothing?
Are you ready to become a millionaire with nothing but your ambition, intellect, and unwavering resolve? If your answer is a resounding yes, then it’s time to take the first step.
With every small victory and learned lesson, you inch closer to your ultimate goal.
Your journey starts with dedication, a commitment to yourself that from this day forward, you will work relentlessly toward the life you envision.
Wealth is not just about the money you accumulate but also the knowledge, experience, and relationships you develop along the way. Wealth creation is often not a straight line but a series of strategic moves and consistent behaviors that, collectively, lead to financial success.
Remember, your current financial position is just a starting point – with the right mindset and actions, significant financial growth is within the realm of possibility.
Your next step is working towards becoming financially independent.
Know someone else that needs this, too? Then, please share!!
Did the post resonate with you?
More importantly, did I answer the questions you have about this topic? Let me know in the comments if I can help in some other way!
Your comments are not just welcomed; they’re an integral part of our community. Let’s continue the conversation and explore how these ideas align with your journey towards Money Bliss.
Are you looking for the best books about budgeting? Learning how to budget can change your life – you may be able to improve your finances, stop living paycheck to paycheck, start living debt-free, improve your net worth, and so much more. All from learning how to budget. To get good at budgeting, I think…
Are you looking for the best books about budgeting?
Learning how to budget can change your life – you may be able to improve your finances, stop living paycheck to paycheck, start living debt-free, improve your net worth, and so much more.
All from learning how to budget.
To get good at budgeting, I think it’s a great idea to learn from people who know a lot about it, which includes reading the best money books. There are all different kinds of budgeting books out there that cater to different people and their unique financial situations, so you are sure to find one that fits what you are looking for.
Key Takeaways
Best Books About Budgeting
Below are the best books about budgeting.
1. The Millionaire Next Door
The Millionaire Next Door: The Surprising Secrets of America’s Wealthy written by Thomas J. Stanley is a favorite personal finance book for many people and is a great first budgeting book to read.
This book helps you to better understand the habits and mindset of millionaires in an easy-to-understand way (and it’s so interesting to read as well!). You will learn about the importance of living below your means and avoiding lifestyle inflation to achieve financial success and build real wealth.
You’ll find out that many millionaires live real simple lives, spending wisely and doing things differently, like how they use their time and raise their kids. It’s surprising to see what being rich really means, and some people who seem rich might actually have a lot of debt.
This is one of the best budgeting books because it teaches you that anyone can retire with wealth.
Please click here to learn more about The Millionaire Next Door.
2. The Simple Path To Wealth
The Simple Path To Wealth was written by J.L. Collins, and it’s one of the best books on money management, especially if you want to retire early.
This highly recommended book makes building wealth easy to understand, and it’s the book to go to if you want to make your finances better but don’t want to spend a lot of time on it.
In his book, Collins talks about important money topics, like staying away from debt, building wealth, understanding the 4% rule, and much more.
Please click here to learn more about The Simple Path To Wealth.
3. Broke Millennial
Broke Millennial: Stop Scraping By and Get Your Financial Life Together was written by Erin Lowry, and is one of the must-read best money books for young adults. The author makes talking about money fun and interesting, especially for young adults.
This book is made for millennials (and young adults!) who want to manage their money well.
Erin writes about how to have a clear plan to stop being broke and gives a step-by-step guide where she covers many different topics, including tricky ones like managing student loans and talking about money with your partner.
I like to give this book as a graduation gift to those finishing high school or college. It’s one of the best personal finance books for beginners because it helps young adults better understand money.
Please click here to learn more about Broke Millennial.
4. The No-Spend Challenge Guide: How to Stop Spending Money Impulsively, Pay off Debt Fast, and Make Your Finances Fit Your Dreams
The No-Spend Challenge Guide by Jen Smith is the perfect book for those struggling with spending. This guide has actionable steps to stop impulsive spending, pay off debt, and align your financial decisions with your dreams.
Jen Smith went from struggling to stay on a budget for more than two weeks to paying off $78,000 of debt in under two years. In her book, she shares experiences and strategies, including using No-Spend Challenges to shift her money mindset and budget more effectively.
Please click here to learn more about The No-Spend Challenge Guide.
5. The One Week Budget: Learn to Create Your Money Management System in 7 Days or Less!
The One Week Budget by Tiffany Aliche (The Budgetnista) is a great book to read if you want to create a better money management system that takes less of your time. So many people are afraid to manage their money because they think it will be hard or take a lot of time, so this is a great book to read to overcome that.
In just one week, this book will help you create a budgeting system to manage your money effectively. This is a great read for anyone new to budgeting or looking for a more simple approach to managing their money.
Please click here to learn more about The One Week Budget.
6. We Should All Be Millionaires: A Woman’s Guide to Earning More, Building Wealth, and Gaining Economic Power
We Should All Be Millionaires by Rachel Rodgers is an inspiring book that teaches women how to build wealth and achieve financial independence.
You will learn how to make better money decisions, strategies to bring in more income, and how to change your attitude about money.
This book will also show you how to overcome obstacles in your life (such as lack of confidence or knowledge) so that you can build wealth.
Please click here to learn more about We Should All Be Millionaires.
7. How to Stop Living Paycheck to Paycheck (2nd Edition): A Proven Path to Money Mastery in Only 15 Minutes a Week!
How to Stop Living Paycheck to Paycheck by Avery Breyer is a practical guide that helps readers break the cycle of living paycheck to paycheck, and it gives tips on budgeting, saving, and investing.
You will learn how to build an emergency fund, get out of debt, avoid budget traps, and more.
This book teaches a complete budget system for beginners and takes only 15 minutes per week to do.
Please click here to learn more about How to Stop Living Paycheck to Paycheck.
8. How To Pay Off Your Mortgage In Five Years: Slash Your Mortgage with a Proven System the Banks Don’t Want You to Know About
How To Pay Off Your Mortgage In Five Years by Clayton Morris and Natali Morris is a great book for anyone looking to pay off their mortgage fast.
This is a helpful read for homeowners looking to shorten their mortgage term and save money on interest in the long run. This is a step-by-step system with a strategic plan to pay off your mortgage fast.
Please click here to learn more about How To Pay Off Your Mortgage In Five Years.
9. You Need A Budget
You Need A Budget: The Proven System for Breaking the Paycheck-to-Paycheck Cycle, Getting Out of Debt, and Living the Life You Want by Jesse Mecham is a great personal finance book that teaches you a step-by-step budgeting system for managing your money more effectively.
You will learn things such as how to pick your priorities for your money, how to not let expenses sneak up on you, how to handle an unexpected expense, and how to get your money to last.
Please click here to learn more about You Need A Budget.
10. The Automatic Millionaire
The Automatic Millionaire: A Powerful One-Step Plan to Live and Finish Rich by David Bach is a book that simplifies the process of becoming financially independent, emphasizing the power of automating your savings and investments.
The Automatic Millionaire begins with the inspiring tale of an ordinary American couple — a low-level manager and a beautician — whose combined income never surpasses $55,000 per year. Remarkably, they achieve debt-free homeownership of two houses, put both kids through college, and retire at 55 with over $1 million in savings.
Please click here to learn more about The Automatic Millionaire.
11. I Will Teach You To Be Rich
I Will Teach You To Be Rich was written by Ramit Sethi and is a great first personal finance book to read. This has been a popular money book for years and for good reason!
This book is full of very helpful lessons presented in a fun way, and he covers the basics of personal finance, including budgeting, saving money, investing, and more.
Please click here to learn more about I Will Teach You To Be Rich.
12. The One Page Financial Plan
The One-Page Financial Plan: A Simple Way to Be Smart About Your Money by Carl Richards is a book that will help you create a single-page plan based on your personal financial goals.
This book will help you figure out how much money to invest each year, how much life insurance you need, how to handle unexpected costs (or a job loss), and more.
If you are looking for more of a visual way to manage your money, then this is the book to read.
Please click here to learn more about The One Page Financial Plan.
13. Your Money or Your Life
Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence by Vicki Robin and Joe Dominguez has sold more than one million copies and is one of the most popular and best money books ever.
This book has been popular for over 25 years (but don’t let that stop you from reading it!), and it’s been updated with more recent topics like side hustles, new investment options, how to track your money online, and more.
This book focuses on mindful spending and helps you reevaluate your relationship with money. This book will guide you in getting out of debt, saving money with mindfulness and good habits, building wealth, contributing to saving the planet, and so much more.
Please click here to learn more about Your Money Or Your Life.
14. The Financial Diet
The Financial Diet (same name as the very popular blog!) by Chelsea Fagan is a guide to managing money, including tips on budgeting, saving, and investing so that you can make smart financial decisions.
This book will teach you how to get good with money, how to stick to a budget, how to invest, how to save money on food, and more.
The Financial Diet is the personal finance book for someone who doesn’t care about personal finance but is looking for a beginner’s guide to improve their financial situation. The writing style of this book will keep you interested and actually want to learn about personal finance.
Please click here to learn more about The Financial Diet.
Frequently Asked Questions About Budgeting Books
Below are common questions about finding the best budgeting books.
What are the best budgeting books for young adults?
My favorite budgeting book for young adults is Broke Millennial, and I personally buy this book and give it as a gift to anyone I know who is graduating from high school or college.
There are many other budgeting books that people love such as How To Manage Your Money When You Don’t Have Any by Erik Wecks, The Total Money Makeover by Dave Ramsey, Money Honey by Rachel Richards, Spend Well, Live Rich by Michelle Singletary, and so many others.
What’s the best budgeting book planner?
A budgeting book planner is a tool that you can use to organize your finances in one place and stick to your budget. You can find many different budgeting book planners here.
Best Budgeting Books – Summary
I hope you enjoyed this list of the best books on budgeting.
As you can see, there are many different budgeting books that can fit your personal situation.
These books talk about different parts of budgeting, like making a basic plan or handling money when you don’t have much. Whether you’re just starting or want to get better at budgeting, there is probably a book above that has something for you to learn.
Here’s a quick list of the best budgeting books listed above:
Whether you’re bringing in $140,000 on your own or that’s your combined household income, you probably feel pretty confident about your homebuying journey. You’re making about double the national median household income, which is $70,784 per the latest Census data, so getting approved for a mortgage and finding homes that fit your budget shouldn’t be too tricky.
Be smart as you shop, though. Earning more makes it easy to spend more — experts call this lifestyle inflation — and if you’re not careful, a hefty monthly mortgage payment could mean your spending outpaces your monthly earnings. Let’s crunch the numbers on how much house you can afford with a $140K salary.
The 28/36 rule
Many financial experts use a fairly simple set of calculations called the 28/36 rule to assess affordability. This guideline breaks down how much of your income should go toward your mortgage and other debts: Per the rule, no more than 28 percent of your gross income should go to your housing payments each month. And no more than 36 percent should be allocated to your total debt, including housing — such as car payments, student loans and credit card bills.
Let’s apply the 28/36 rule to your $140K salary to see how much you should be spending on housing costs:
Calculator
$140,000 / 12 = $11,667 (gross monthly income)
$11,667 x 0.28 = $3,267 (the most you should spend on housing costs each month)
$11,667 x 0.36 = $4,200 (the most you should spend on total debt each month)
How much house can you afford?
But wait, you might be thinking. I want to know a purchase price, not just how much I should spend on my mortgage payments. Bankrate’s mortgage calculator can help: It shows that if you were to buy a $500,000 home, with a 20 percent down payment and a 30-year loan at 7.5 percent interest, your monthly principal and interest payments would be $2,796. That leaves you a few hundred dollars to cover home insurance premiums and property taxes, which will vary widely depending on your location, before you hit that $3,267 cap.
So hypothetically, you can afford a $500K home. Don’t forget, though, that this does not include your upfront expenditures: a 20 percent down payment on a home of that price is a significant $100,000, plus closing costs.
And these aren’t the only factors to consider before you start house shopping. Here are some other metrics mortgage lenders look at to make sure you’re not overextending yourself:
Credit score: The higher your credit score is, the better the interest rate you can get — which means you’ll pay less in interest. This translates to big savings over the life of the loan, so it’s worth getting your score in the best shape possible before your house-hunt begins.
Debt-to-income ratio: Often called DTI, this metric is similar to the 28/36 rule in that it measures how your debt obligations stack up against your income. If you stay below 36, you should be in good shape, although some lenders allow for a higher DTI.
Down payment: You might have heard that you need to put 20 percent down, but that’s not necessarily true. Some loans require as little as 3 percent for a down payment. However, paying less upfront means borrowing more, and thus bigger monthly payments. And putting down the full 20 percent lets you avoid paying private mortgage insurance on top of your mortgage payment. With your $140K salary, shelling out a bigger down payment just makes sense.
Desired location: In most parts of the country, a $500,000 housing budget will probably get you a spacious single-family home. But in particularly pricey markets, like New York City or the San Francisco Bay Area, it might buy a lot less. Consider general cost of living prices, too, from groceries to transportation to entertainment. Make sure you can afford not just the house, but the lifestyle you want to live.
Home financing options
Even if you’re comfortable spending half a million dollars on a home, you probably don’t have that kind of cash just lying around. That’s where home financing comes in.
Get preapproved for a mortgage
Before you even start house-hunting, it’s smart to get preapproved for a mortgage. Preapproval isn’t final approval, but it tells you the size of the loan you’re likely to get, which helps ensure you don’t waste time looking at homes that don’t fit within your budget. It can also be crucial in competitive markets, where there may be more than one offer on a home — your preapproval lets sellers know you are a serious, qualified buyer.
Different types of loans
There are many different types of mortgages that can help you make that half-million home yours. Most have specific credit-score requirements, and you may not be eligible for some due to your high salary. If you are a military service member or veteran, it’s well worth looking into VA loans, and FHA loans are often popular with first-time buyers and borrowers with poor credit. But with a $140K salary, you’ll probably be looking at a conventional loan. A knowledgeable loan officer or mortgage broker will be able to explore your options with you.
First-time homebuyer programs
Are you transitioning from renter to homeowner for the first time? If so, you might be able to take advantage of first-time homebuyer programs, which can range from grants to low-interest or forgivable loans offering closing cost and down payment assistance. However, many such programs come with a maximum salary cap, so your $140,000 income might make you ineligible.
Getting started
When you’re ready to jump into the homebuying market, working with an experienced real estate pro in your desired area is your best first step. Local agents know their markets well and will be able to show you home options that match your needs and your budget. Ask for recommendations from friends and family, look at yard signs in the neighborhoods you like and research online to find some good candidates. Then, interview a few people before you choose the right one for you.
Jonathan at My Money Blog has been writing about personal finance for two years now. Here’s some excellent advice on the standard-of-living trap.
One thing I worry about is lifestyle inflation. No matter how little or how much someone earns, their spending tends to match their income. When you’re living the student life, your friends are also broke, and it’s easy to eat frozen pizza for dinner and manage without a car. That was probably one of the funnest periods in your life! But when you have more money, you start looking to upgrade: a nicer car, a bigger house, brand name clothes, cooler gadgets. Call it peer pressure, entitlement, or simply money burning a hole in your pocket.
As we progress along our career paths, here are a couple of things that my wife and I are trying to do in order to try and inflation-proof our spending:
Put saving first. You’ve heard it before, but that’s because it’s works. Pay yourself first. If you get a raise, immediately increase the percentage going into your 401k, IRA, or savings account. The less that’s ending up in your checking account, the less you’ll have the urge to spend.
Put debt last. Making more does not mean you can borrow more, contrary to what the credit card companies or other lenders may suggest. Even though I now have credit lines nearing $20,000 on a single card (which is totally crazy to me), I would never consider using that money to buy any depreciating asset.
Living on one income. Our goal has always been to be able to both work half-time in order to have more time to raise our future children. If this can’t happen, then one of us will work while the other stays home. Right now, we are trying to do this even though both of us are currently working. Doing this will force us to deal with less money and place more importance on the other things in life.
Buy an affordable house. For most people their largest monthly expense is housing. Affordable does not mean what the bank will let you borrow! By simply buying the biggest house possible, you’re also inflating many other things. You have to furnish all those extra bedrooms, heat them every winter, cool them every summer, and insure them. Sure, it will appreciate more, but that money could be put towards other investments. As we plan to live in a very expensive area, this rule will probably be the hardest for us not to break, especially with our one-income rule.
Be realistic about cars. Probably the second largest monthly expense for many. I personally love cars — they were part of the reason I became an engineer. But I also know that a new luxury car means more than just higher monthly payments. It means more expensive insurance, maintenance costs, and repairs. It also likely has a bigger engine, which means less fuel economy, and may even require premium-grade fuel. We have never even owned a new car before.
Basically, we are trying to define a comfortable, simple lifestyle that focuses on what is really important to us. We realize that our standard of living is already greater than 99% of the world. Anything we buy or purchase should be in response to an actual need or something we really value, not simply because “we can afford it”. The things that we buy on a $75,000 salary shouldn’t be much different than if we had a $750,000 salary. For example, my wife cuts my hair because I like having a simple haircut, it’s not difficult, and she does it how I like it. Even if we become millionaires someday, she’ll still cut my hair.
Many of you wrote last week to say that I was too harsh on my friend Gillian, the woman with the “I can’t” attitude. Perhaps you’re right — I may have given up too early. I used to live like she does, and if I can turn it around, anyone can.
For a decade I was a deficit spender. I spent more than I earned. I used credit cards to fund a lifestyle that was beyond my means. Eventually I wised up — I destroyed my credit cards and cancelled my accounts, but my worries weren’t over yet. I wasn’t digging any deeper, but I was still stuck at the bottom of a hole: I was living paycheck-to-paycheck.
Twice a month I would deposit my paycheck, pay my bills, and then look to see how much was left. Whether the surplus was $20 or $200, I made plans for it: comic books, video games, clothes, whatever. I used to joke that I was an expert at spending every penny I had. Except that it was no joke. Late at night, when I couldn’t sleep, I would wonder why I could never get ahead.
I lived like this for years. You can maintain a paycheck-to-paycheck lifestyle for a long time if you’re not taking on new debt (and if disaster doesn’t strike). Here’s another way to look at it:
If you spend more than you earn, you are acquiring debt.
If you spend about what you earn, you are living paycheck-to-paycheck.
If you spend less than you earn, you are acquiring wealth.
I don’t know about you, but my goal is the latter. Escaping the paycheck-to-paycheck lifestyle means building positive cash flow, getting ahead of your expenses. Instead of spending exactly what you earn, you need to save something every month; even $25 or $50 can make a difference. Once you start, this amount has a tendency to snowball. For me, a $25 surplus grew into a $100 surplus, which grew into $300 per month and more!
But how do you start generating this surplus? How do you escape from the paycheck-to-paycheck pit? Here are some ideas that worked for me — one or more of them may work for Gillian. Or for you.
Start a savings account. For years I resisted the idea of opening a savings account. “Why should I?” I said. “I don’t have money to save. I barely have anything in my checking account!” But when I finally did open a savings account three years ago, a funny thing happened. I started finding money to stash there. It wasn’t much at first — $20 here, $75 there — but in time, it made a difference. Before long I had developed the savings habit.
Pay yourself first. The best way to begin your escape is to save first, before you do anything else with your paycheck. I know this can be difficult. You worry that you won’t have enough for your bills, for gas, for food. But the danger is that if you don’t set the money aside first, you’ll just spend it. Have a small amount — $25? $50? — automatically deducted from your paycheck and placed into savings. Chances are you won’t even miss the money.
Spend with purpose. You may want to consider a budget. Budgets aren’t scary, and they’re not difficult. Some people find them liberating. There are a variety of computer budgeting tools available, including:
A budget can be handy, but even if you can’t bring yourself to use one, you should know where your money needs to go.
Draft a spending plan. I don’t keep a budget, but I do create a financial plan every few months. It’s nothing more than a quick financial snapshot showing my income and expenses. I also list upcoming major outlays. This helps me keep my financial goals in mind as I go about my daily life. It’s easier for me to decide not to buy the latest Spider-Man comic when I remember that I’m saving for a trip to Europe.
Attack your debt. These methods are great, but if you really want to free up cash, pay off a debt. I recommend using a debt snowball to tackle your obligations one after the other. But if your goal is to ease financial pressure ASAP, you may want to try a slightly different approach. Pay off your debt with the smallest balance, but instead of rolling the freed cash flow into the next debt, use it to establish a savings buffer.
Cut costs. This one’s obvious, but can be difficult. My friend Gillian views cutting costs as deprivation. If you’re willing to look behind the immediate sacrifices to the long-term gains, cutting costs is an excellent, quick way to free up cash. There are a million little things you can do to save money now.
Boost your income. Many people have suggestions for how to cut costs, but few remember there’s a second side to the wealth equation. Earning extra money helps just as much as practicing frugality, and sometimes hurts less. But how do you get extra cash? Find a part-time job for a few months. Sell some of the stuff you’ve acquired over the years. Ask your boss for a raise. Find a way to make money from your hobbies.
Avoid lifestyle inflation. A final way to escape the paycheck-to-paycheck purgatory is to opt out of lifestyle inflation. When you get a raise, don’t adjust your standard of living to match. Use part of this new money to pay off debt, and another part to accelerate your savings. When your friends show you their new iPhones, ooh and aah, but resist the urge to get one yourself. Learn to love what you already have.
When I became serious about my finances, I realized that living paycheck-to-paycheck was dangerous. I was always one disaster away from returning to the credit bandwagon. I made a resolution to stop living on the edge and to start saving. It was difficult at first. Old habits die hard. But with time and persistence — and with the habits above — I made the switch. Now, a couple years further on, I’m just beginning to profit from my hard work. I have a monthly cash surplus. I have escaped from the paycheck-to-paycheck lifestyle.
It can be tough to get a good handle on your finances, especially when you’re first starting out in your career or just don’t have a lot of cash to spare. Throw in student loan debt, a worldwide pandemic, and growing economic uncertainty, and it can seem especially daunting to get your financial situation on the right track.
Luckily, there are a few bad money habits that you can break that will make getting your finances in order easier. While there are many aspects of your financial situation that you can’t control, getting rid of bad money habits and forming new, responsible habits when it comes to spending and borrowing can set you up for success.
What’s Ahead:
1. Spending More than You Earn
How much you spend vs. how much you earn is one of the key factors that can make or break your financial health. You should always aim to spend less than you make each month, with the goal of saving 20% of your income each month.
While this sounds simple enough, life can get in the way sometimes, whether you have a couple of unexpected expenses that tank your budget, you lose a source of income, or you just don’t quite make enough to meet your basic needs each month. Even if you find yourself unable to spend less than you make right now, earning more money than you spend should always be your ultimate goal when it comes to setting your finances in order.
2. Living above Your Means
Living above your means can put a serious dent in your finances if you aren’t careful. While you probably don’t need to be frugal to the extreme, you should steer clear of expensive and unnecessary purchases like new cars, luxury apartments, and fancy vacations if you’re still trying to get your financial footing. This doesn’t mean you can’t treat yourself every once in a while, but it does mean you should make it work within your budget.
3. Not Sticking to a Budget
How do you know how much you can spend each month while still living within your means? The easiest way to do so is to make (and stick to) a budget.
You should include necessities like housing, utilities, groceries, and insurance, and may want to add categories for saving and discretionary “fun” spending each month if your budget allows.
Not sure where to start? Budgeting software like PocketSmith makes budgeting easy and painless.
4. Not Tracking Spending
After you set a budget, the next step is to track your spending each month to make sure that you’re sticking to it. Tracking spending can help you to make sure that you’re not going over budget in any one area. It also helps you to keep track of your finances and get a clear-eyed view of what you spend your hard-earned money on.
5. Not Educating Yourself about Personal Finance
The world of personal finance can be full of jargon and terms that are confusing for beginners. I had never studied business or accounting and found many financial terms frustratingly opaque when I first started to learn more about personal finance.
Unfortunately, poor financial literacy can have negative consequences when it comes to your financial wellbeing. Knowing enough about personal finance to make responsible and educated decisions when it comes to money is really important. Luckily, there are plenty of free resources online (including the articles here at Money Under 30!) to get you started.
6. Not Building up an Emergency Fund
A sizable safety net is another cornerstone of good financial health. After you’ve set a budget and begun to track your spending each month, you should start to put money away each month towards an emergency fund.
Most financial experts recommend that you save between three and six months worth of expenses in an emergency fund. If you’re not sure exactly how much to save, you can use MU30’s emergency fund calculator to figure it out.
7. Not Saving for Retirement
Once you’ve established a budget and stashed away some money for an emergency fund, the next step on your path to financial wellness should be to start saving for retirement. This is especially important if your employer matches retirement contributions since you’re basically leaving free money on the table if you don’t contribute up to their match limit.
If your employer doesn’t offer any retirement savings options, you can contribute to a traditional or Roth IRA (the contribution limit is $6,000 in 2020.) Once you’ve maxed out your retirement contributions for the year, you can save or invest any additional cash that’s leftover.
If you’re not sure how much you should be saving, MU30’s investment calculator can help you plan your savings goals. If you need help with the ins and outs of investing for retirement and beyond, investing services like blooom (which helps you manage your IRA or 401(k)) and Public investment app make investing accessible even for beginners.
8. Not Paying off Your Credit Card Balance in Full Each Month
I’ve certainly been there – when you’re not making enough to make ends meet and need to pay your bills each month, it can be tempting to put extra expenses on a credit card.
While credit cards provide welcome flexibility and rewards redemption opportunities, they can quickly turn into a major debt burden if you’re not careful. If it’s at all within your means, you should try to pay off your balance in full each month to avoid accumulating interest and building up debt.
9. Making Late Payments
Late payments are another common financial mistake when you’re new to personal finance. Unfortunately, they can have lasting consequences when it comes to your credit score and your wallet.
Late payments on bills often come with additional late fees and interest, and a history of late or missed payments can lower your credit score. If it’s your first time making a late payment, you should contact your creditor to see if they can forgive a one-time late payment.
10. Not Investigating All Your Options when it Comes to Financial Products
It can be easy to go with the path of least resistance when it comes to personal finance products like bank accounts, credit cards, and loans. Whether you get a recommendation from a family member or friend, get a flyer in the mail, or see an ad online, you may be tempted to go with the first available option.
Resist that temptation – you should always compare different financial products in order to ensure you’re getting the best deal possible.
11. Spending Too Much on Groceries
Groceries are definitely one of the biggest weaknesses in my budget! It’s so easy to spend more than you mean to at the grocery store, especially if you love to cook and eat delicious food.
If cooking at home and eating well is important to you, it’s okay to budget a little extra in the grocery department. But you should try your best to reign it in and stick to a reasonable monthly goal when possible. I’ve found it also helps to plan meals in advance, shop at bulk stores like Costco, and invest in shelf-stable staples like rice and lentils to stretch my budget even further.
12. Buying Everything New
If you’re trying to save money and get your finances under control, buying everything new can siphon off hundreds of dollars in savings each year. No matter what you’re looking to buy, from cars to clothing and everything in between, there are probably cheaper gently used options.
I love trawling Craigslist, yard sales, and thrift stores for hidden gems! While you probably won’t be able to find absolutely everything you need, it’s still a good idea to check out your options before you buy any brand new items at the sticker price.
13. Not Investing in Insurance
When your budget is already tight, it can be tempting to forgo insurance in favor of making ends meet. But going without insurance can put you in an even worse financial situation when you need help the most.
If you’re able to, you should invest in insurance including health insurance, home or renters insurance, and auto insurance to make sure that you’re covered in the event of an emergency. Insurance marketplaces like Policygenius can help you to find an affordable insurance policy that works for you.
14. Ignoring Your Student Loans
Like many Millennials, I have a pretty sizable student loan burden racked up over the course of undergrad and graduate school. Making student loan payments on time each month can be a major strain on your budget, but failing to pay off your loans can have even worse consequences.
Luckily, there are some options to make paying down your loans more bearable. When it comes to federal student loans, you may be eligible for an income-based repayment plan that could drastically reduce your monthly payment. And for private student loans, you may qualify to refinance your loans at a lower rate and save on interest.
15. Spending More than You have to on Phone Plans
Phone plans are another common monthly expense that can add up fast if you’re not careful. When purchasing a phone plan, you should think about what services and data you really need before automatically selecting an expensive plan.
It can be helpful to look back at old billing statements and see how much data you really used each month. You may also want to consider getting on a family plan with family members, friends, or roommates to save money each month.
16. Not Shopping around for Auto Insurance
If you haven’t changed your auto insurance policy in a while, there’s a good chance that you could be saving money each month if you make a switch. That might sound like an auto insurance sales pitch, but it’s true!
Your rates are likely to be lower after you switch if it’s been a long time since you’ve been in an accident, or just because you’ve gotten older and are viewed as a less risky driver by insurance companies. Some car insurance companies, like Metromile, charge you based on how many miles you drive each month, which can be a boon if you’re mostly working from home.
If you’re happy with your insurance provider and don’t want to make a switch, ask them if they can reevaluate your monthly rate or match quotes from the competition.
17. Subscription Bloat
Subscription services have proliferated in recent years, from popular software like Adobe Creative Cloud to monthly subscriptions for everything from TV channels to cute underwear. While it’s easy to sign up for a subscription and forget about it, especially if it only costs a few dollars a month, they can really add up over time.
One way to cut down on subscriptions is to survey your bank statement at the end of each month and evaluate which subscription charges are truly worth it.
If you don’t want to take the time to do this yourself, you can set up an account with Trim, a service dedicated to helping you clear out your unused subscriptions. They’ll even negotiate your bills for you on your behalf!
18. Lifestyle Inflation
Whether you just got a pay raise or started a lucrative side hustle, it can feel incredibly freeing to have a little extra cash left over at the end of each month. While it’s tempting to treat yourself and celebrate your new success, you shouldn’t let lifestyle inflation eat into your budget. By living within your means and socking away any additional money you earn into savings and investments, you can set yourself up for a bright financial future.
19. Not Having a Career Plan
While reducing your expenses, saving, and investing are all good strategies toward sound financial health, one of the most effective ways to jumpstart your finances is to earn more money. This isn’t always as difficult as it sounds!
By planning out your career path, you can work toward earning more in the future. If you think you’re not being compensated enough at your current job, you might want to consider asking for a raise or applying to better-compensated positions at other companies.
20. Not Setting Financial Goals
Earning, budgeting, and saving money is a lot easier to do if you have concrete goals in mind. Whether your goal is to be debt-free, save up for a major expense like a new car or a wedding ring, buy a house, or even retire early, setting financial goals can motivate you to break bad money habits and create new, healthy habits that help you achieve your dreams.
Personally, I’m saving up for a little house in the countryside with a big vegetable garden and a little chicken coop.
21. Not Setting Personal Goals
Financial goals are usually pretty tightly interwoven with personal goals. Maybe your personal goal is to work part-time and spend more time with family, or maybe you dream of saving up money to travel the world.
Maybe you’re happy making less money at a job that you believe in and that makes the world a better place, or maybe you prefer a low-stress job with decent pay that allows you to devote time to creative projects. It’s a good idea to get a firm sense of your personal goals so that you can then use them to inform your professional and financial goals.
Personal finance doesn’t take place in a vacuum, and there are plenty of factors outside our control when it comes to making and saving money. If there’s a cause you care about that has an impact on personal finance, like equitable worker compensation, universal healthcare, predatory lending, or other issues, you should consider getting involved.
While one person might not be able to change these big issues alone, many people working together can have a positive impact that stretches far beyond your own bank account.
Summary
The flip side to breaking bad habits when it comes to money is forming better ones in their place. This can be especially hard if you’re struggling financially, but every little step you take in the present will pay off dividends in the future.