Do you find yourself dreaming about what you would do if you were a millionaire? Maybe you fantasize about retiring early and traveling the world. Or perhaps what excites you is the thought of being able to donate to causes you care about.
But, you might be wondering, how to become a millionaire? You may suspect the only way you’ll ever be that rich is if you win the lottery.
Fortunately, the road to wealth isn’t that narrow — there are many ways to become a millionaire. For instance, some individuals retire with over a million dollars in savings because they made good financial decisions.
Others may have started businesses that brought them success, advanced their careers so that they made enough to save seven figures, or made smart investments.
Read on to learn more about how to become a millionaire, and strategies that could help get you there.
Introduction to the Millionaire Mindset and Goals
You may have a certain image of a millionaire in your mind. Maybe it’s a jetsetter or a celebrity. But many millionaires are not born into wealthy families or individuals who suddenly struck it rich. In fact, many millionaires are people who work for a living every day. In general, what tends to set them apart is that they have a millionaire mindset. They are smart and disciplined when it comes to their money. And they stay focused on their financial goals.
Defining What it Means to be a Millionaire
The true definition of a millionaire is someone with a net worth of at least $1 million. That means that their assets, minus any debt, is $1 million or more.
So, if you have $500,000 in savings and investments, plus a house that’s worth at least $500,000, are you a millionaire? Yes, if you own the house outright and don’t have a lot of debt such as car loans, student loans, or credit cards to pay off. But if you still owe money on your house and you’ve got a fair amount of debt to repay, you probably aren’t a millionaire. At least, not yet.
To do the math for your situation, total up your assets. Then subtract your debts from that amount. This will show you how close you are to reaching millionaire status, and possibly give you a sense of what you might have to do to get there.
Following these eight strategies can help when it comes to how to become a millionaire. 💡 Quick Tip: Did you know that opening a brokerage account typically doesn’t come with any setup costs? Often, the only requirement to open a brokerage account — aside from providing personal details — is making an initial deposit.
Step 1: Stay Away From Debt
As we just saw in the example above, one thing that could be holding you back from becoming a millionaire is debt — especially if that debt is “bad debt,” a term often used for high-interest debt. Eliminating your debt is key because it’s difficult to build wealth if you’re paying a significant portion of your income toward interest.
Paying off debt could help free up money to invest and build wealth. One way to repay debt is to use the debt avalanche method. With this technique, you pay off your debts with the highest interest rates first and then focus on debts with the next highest interest rates (while still making minimum payments on all of your debt, of course).
Eliminating debt isn’t just about paying off existing debt, though, it’s also about avoiding the chances of going into debt in the future. Part of a debt payoff strategy could involve spending less so that you don’t need to rely on credit. You can also set a strict budget and pay with cash whenever possible.
In addition, you may want to create an emergency fund by setting aside a certain amount of money every month. That way, if you have a financial setback, you don’t have to go into credit card debt.
Step 2: Invest Early and Consistently
Investing successfully doesn’t happen overnight. It takes time. That’s why you need to start early. There are a few rules to know that could help you improve your chances of becoming a millionaire.
Benefits of Compounding Returns
First, compounding returns can make all the difference. They can help your money grow, as long as the returns are reinvested.
Here’s how they work: Compounding returns depend on how much an investment gains or loses over time, which is known as the rate of return. The longer your money is invested, the more compounding it can do. That’s why some individuals start saving aggressively when they’re young.
Saving $100,000 by the time you’re 30 might not be possible for everyone, but the more you save early on, the greater impact it could have on your net worth.
And here’s the thing: Even if you’re in your 30s, 40s, or 50s now, it’s never too late to start saving. The important thing is that you start, period. And that you keep saving.
There are other investing strategies that could help as you work on how to become a millionaire. For instance, you could reduce the amount you spend on investment fees. High investment fees can have a big impact on your returns, so you might want to look into low-fee investments.
Also, you should make sure that you invest in a way that’s right for you throughout your life. That may mean investing more aggressively when you’re younger and gradually becoming more conservative in your investments as you get older and closer to retirement.
Step 3: Make Saving a Priority
Your savings is the amount of money you have left after paying taxes and spending money.
Many Americans aren’t saving enough to become a millionaire — in October 2023, the average personal savings rate was 3.8%, according to the Bureau of Economic Analysis. You’ll likely need to save more than three times that amount to become a millionaire.
Effective Saving Strategies for Long-term Wealth
To save for your goals, start by investing in your company’s 401(k). Max out your 401(k) if you can. At the very least, invest at least enough to earn the employer match, if there is one. That way your employer is contributing to your savings.
In addition, consider opening a traditional IRA or a Roth IRA and contribute as much as possible — up to the limit set by the IRS. These IRAs are tax-advantaged, so they’ll help with your tax bill, too.
And investigate other savings options as well. For instance, you could open a high-yield savings account rather than a regular savings account for a higher return.
Step 4: Increase Your Income
You can’t join the ranks of millionaires if you’re not bringing in more money than you need for your basic necessities. The more money you make, the more you can save and invest.
Tips for Boosting Earnings and Maximizing Income
Some ways to boost your income include asking for a raise or looking for a new higher-paying job. You could also go back to school to earn an advanced degree that could lead to a position with a higher income. Your current employer might even help you cover the cost; check with your HR department.
Another one of the ways to earn extra money is to take on a side hustle. You could tutor students on evenings or weekends, do freelance writing, or dog sit. And those are just some of the options to consider.
Step 5: Cut Unnecessary Expenses
Getting control of your spending is critical to building wealth. That doesn’t mean you have to cut back on everything that gives you pleasure, but you could consider the happiness return on investment you get from the money that you spend. How big of an apartment or home do you truly need to be content? What kind of car do you need? Do you have to buy lunch out every day or could you bring your own lunch from home?
Identifying and Eliminating Non-Essential Spending
You could find ways to cut back on the things that don’t matter so much, but not skimping to the point that you miss out on things you love. For example, maybe you need your gym sessions (and there are plenty of low-cost gyms out there), but you can do without a $5 latte every morning.
Also, you could focus on cutting back on big expenses instead of those that won’t have a huge impact on your budget. For example, dining out only once a month, adjusting your thermostat higher or lower depending on the season, or finding a less expensive, smaller home could help you save a significant amount of money over time. 💡 Quick Tip: Distributing your money across a range of assets — also known as diversification — can be beneficial for long-term investors. When you put your eggs in many baskets, it may be beneficial if a single asset class goes down.
Step 6: Keep Your Financial Goals in Focus
To become a millionaire, you’ll need to stay laser-focused on your financial goals. When everyone else around you is spending money, going on fancy vacations, and buying expensive cars, remind yourself what’s truly important to you. Keep your spending in check, continue to save and invest, and avoid taking on debt.
It takes discipline. But instead of thinking about the stuff you don’t have, appreciate all the good things in your life, like your family and friends. Remember that you’re saving for your future. You’ll be able to enjoy yourself then if you have the money you need to live comfortably and happily.
Think of it this way: You’re making yourself and your financial security the priority. Make that your mantra.
Step 7: Consult with Investment Professionals
Investing can be complicated because there are so many options to choose from. If you need help figuring out what investments are right for you, consider working with a qualified financial advisor.
Leveraging Expert Advice for Wealth Building
A good financial advisor could help you select the right investments and the best investing strategies for your situation. They can also help you plan and budget to reach your goals. But be sure to be an active participant in the process. Ask questions, be involved. Why are they suggesting a specific investment? And if you don’t feel comfortable with something, say so.
Finally, be sure to check your investment performance regularly. Know what you are investing in, how much, and why.
Recommended: How to Find the Best Investment Advisor For You
Step 8: Repeat and Refine Your Financial Plan
The final step to becoming a millionaire is to stay committed to your goal and your plan. Keep saving and investing your money. Stay out of debt. Let time and the power of compounding returns kick in. Be patient.
But also, don’t be afraid to refine or change your plan if need be. For instance, as you get closer to retirement, you will likely want to choose safer, less aggressive investments. You can keep saving and growing money throughout different ages and stages, but your method for doing so can evolve to make sense for where you are in your life.
Additional Tips for Wealth Building
In addition to all of the strategies above, there are a few other techniques that may help you reach millionaire status.
Lifestyle Considerations and Spending Habits
As you work your way up the ladder and earn more money throughout your career, you may be tempted to increase your lifestyle spending, too. After all, you have more money now, so you may feel the urge to spend it.
But here’s the thing: Giving in to these temptations can be a slippery slope. It might start with a bigger house in a nice neighborhood, and then grow to taking extravagant vacations and driving a luxury car. Before you know it, you could be spending way more than you’re saving.
Try to avoid lifestyle splurging if you want to be a millionaire. Instead, take the extra money and save and invest it. That way, you’ll be able to reach your goal even faster.
The Takeaway
Becoming a millionaire is possible if you take the right approach. It involves saving and investing your money, spending wisely, and avoiding debt. You need to be disciplined and focused, and it won’t always be easy. But staying committed to your goals can reward you with financial security and success.
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It’s almost that time, when everyone resolves to do better and achieve more in the coming year. And a new survey suggests that some people may be fueling their 2024 resolutions with the financial regrets of 2023.
About two-thirds (67%) of Americans have financial regrets for 2023, according to a NerdWallet survey conducted online by The Harris Poll on Oct. 10-12. And three-fourths (75%) of that group say those regrets will lead to new resolutions in 2024.
Every year we face obstacles to our money goals. We may start out with plans to save more and spend less, but life happens. This year began with expenses taking bigger bites out of paychecks, in the form of high inflation. And as the year progressed, increasingly high interest rates added costs to credit card balances and loans, making it more expensive to borrow. Macroeconomic factors like these can be enough to derail financial goals alone, but if they’re paired with job loss, unexpected expenses or other household circumstances, they can push goals further and further out of reach.
If you have financial regrets, you’re in good company. And if your hope is to turn them into successes in 2024, plenty of other Americans have the same plan. Here’s how some of those regrets may have come about and what to expect in the year ahead.
Money regret No. 1: Not saving more
Nearly one-fourth (23%) of Americans regret not saving enough for their financial goals in 2023, according to the NerdWallet survey. And about one in five (21%) regret not saving for emergencies.
Government relief payments paired with constrained spending during COVID shutdowns to bring the personal saving rate to all-time highs in 2020 and 2021. In 2023, that rate, which measures the percentage of disposable income that can be saved, on average, settled below historic averages, making it more difficult to save for big purchases or unexpected emergencies.
In 2024: The personal saving rate, as a national average, is likely to stay on the low side. However, with inflation continuing to come down, you may find it easier to set aside funds in 2024 than you did in 2023. If you don’t have an emergency fund, start there — having a cushion set aside for unexpected expenses can insulate many of your other financial objectives. Then, set measurable and specific benchmarks — such as setting aside a certain portion of every paycheck — to get you toward your longer-term savings goals.
Money regret No. 2: Overspending
More than one in five (22%) Americans regret overspending on entertainment in 2023; 11% regret overspending on travel and 11% regret overspending on a big event (such as a wedding or party), according to the survey.
Consumer spending in 2023 has been surprisingly resilient in the face of inflation and high interest rates. This consumer resilience has been credited with keeping the economy strong when many expected a recession. But there is also evidence that this spending in the face of adversity has been achieved by busting household budgets.
In 2024: Overspending is a risk every year — it’s hard not to splurge on things like entertainment, travel and parties (we all enjoy a good time). The first step to reining in these urges, however, is setting a clear budget. Whether it’s a weekly entertainment budget or a wedding budget, setting a clear expectation for yourself beforehand can help ensure you’re not left with remorse when the dust settles.
Money regret No. 3: Mismanaging credit card debt
Equal shares of Americans (16%) regret not reducing/or paying off their credit card debt and taking on too much credit card debt in 2023, according to the survey.
Credit card debt levels fell during 2020 and early 2021, as people had excess money thanks to relief payments and student loan forbearance, for example, and were generally spending less due to COVID lockdowns. But since then, debt levels have been surpassing pre-pandemic normal. If you used your cards less in 2021 and even paid off some debt, this return to “normal” can feel especially bad.
In 2024: When your finances are in good shape, using credit cards as a tool — to earn points and cash back, for instance — can help you reach money goals more quickly. However, when you’re in debt or have to turn to a credit card to cover an emergency expense, the interest can pile up quickly and make it difficult to dig yourself out. Interest rates will likely remain high throughout 2024, so getting those balances under control is even more important. Make a concrete debt payoff plan, and if you’re struggling to make payments, consider debt relief options such as consolidation and debt management.
Lest 2023 sound like nothing more than money woes: More than three in five (62%) Americans say they achieved financial goals they set out to reach in 2023. Financial headwinds are always present in one form or another. Preparing for them and learning from mistakes may set you up for a greater chance of success in the near future.
METHODOLOGY
This survey was conducted online within the United States by The Harris Poll on behalf of NerdWallet from Oct. 10-12, 2023, among 2,096 U.S. adults ages 18 and older. The sampling precision of Harris online polls is measured by using a Bayesian credible interval. For this study, the sample data is accurate to within +/- 2.7 percentage points using a 95% confidence level. For complete survey methodology, including weighting variables and subgroup sample sizes, please contact [email protected].
Disclaimer
NerdWallet disclaims, expressly and impliedly, all warranties of any kind, including those of merchantability and fitness for a particular purpose or whether the article’s information is accurate, reliable or free of errors. Use or reliance on this information is at your own risk, and its completeness and accuracy are not guaranteed. The contents in this article should not be relied upon or associated with the future performance of NerdWallet or any of its affiliates or subsidiaries. Statements that are not historical facts are forward-looking statements that involve risks and uncertainties as indicated by words such as “believes,” “expects,” “estimates,” “may,” “will,” “should” or “anticipates” or similar expressions. These forward-looking statements may materially differ from NerdWallet’s presentation of information to analysts and its actual operational and financial results.
Whether you’re dreaming of beaches in the Caribbean or roaming the streets of Paris, one thing’s for sure: Traveling is expensive. Factor in the cost of flights, food, and lodging, and it’s no wonder some people feel like traveling is reserved only for the rich and famous.
The good news? Traveling doesn’t have to break the bank. Saving enough money for your next holiday is totally doable, and it all starts with proper budgeting for travel. With a defined vacation budget and some planning, you could request time off for travel sooner than you think. Here’s how to do it.
How to build a travel fund
Before you start booking plane tickets and buying museum tickets, you’ll need to determine what’s realistic for your current financial state, according to Athena Valentine Lent, author and founder of Money Smart Latina. If this is your first time budgeting for travel, Lent says these three steps can help you get started:
1. Set a savings goal for your trip
Budgeting for travelstarts with identifying where you want to go and calculating the total amount of money you’ll need to cover that trip.
“Decide where you’d like to go, and start from there,” Lent says. “Research the best times to visit your travel destinations, so you can take advantage of any off-peak seasons. If you’re unable to visit during that time, consider another place.”
In addition to researching prices of big-ticket items like airplane tickets, Lent recommends researching all potential expenses to paint an accurate picture of your total cost. “Look into how much you’ll pay for lodging, food, transportation to get there—plus transportation while there—and any other exhibits or bucket items you want to check off while you’re there,” she says.
Vacations can and should include plenty of spontaneity, so Lent recommends giving yourself some extra wiggle room in your travel fund to cover other possible expenses (think: last-minute excursions and souvenirs). As you continue to plan, creating a financial vision board can help you visualize your dream vacation and keep you motivated during your savings journey.
2. Turn one big goal into multiple smaller goals
Once you’ve established how much your trip will cost, determine the amount you need to save on a monthly, bi-weekly, or weekly cadence until you can fully fund your goal, Lent says. For example, if you’ve figured out that you need $1,000 for a trip coming up in five months, you’d want to save $200 a month. Or if you wanted to break it up into even smaller chunks, you could have a savings goal of $50 a week.
Breaking your goal into smaller steps makes it appear more manageable, Lent says. Saving $200 a month feels much more attainable than trying to put away $1,000 all at once. Psychologically, splitting up a large goal into multiple smaller ones gives you a sense of accomplishment every time you cross one of your funding milestones.
3. Keep your travel fund in a separate savings account
There are ways to make your money work harder for you. With a high-yield savings account, you’ll earn a specific percentage of interest on your money, known as an annual percentage yield (APY). That interest is compounded, too, so you’ll grow your savings even faster.
Keeping your travel fund in a separate savings account is another helpful strategy. It can streamline your efforts, making it easier to track progress and know exactly when you’ve reached your goal.
“I love me a high-yield savings account,” Lent says. “The ability to put cash aside into a different account labeled with a goal motivates me to call it ‘my precious’ and protect it. I’m also a firm believer in making your money work for you.”
Tips for keeping your travel fund on track
Making a plan and budgeting for travel is a critical first step, but if you want to make your dream vacation a reality, you’ll need to stay on track. To keep your momentum going, consider these four tips for how to save money for travel:
1. Curb your spending habits
Looking for some low-hanging fruit? Lent says to try reducing nonessential spending first. While that might mean spending less money on things like dining out or new clothes, it doesn’t mean you need to live like a hermit to achieve your financial goal.
“Cutting back on your discretionary spending can seem brutal when all you want to do is live your current lifestyle,” says Lent. “My advice is to cut spending in small amounts at first and then look for cheaper ways to do the things you want to do. As you begin to cut back while still doing the things you love, you won’t be depriving yourself, which makes it easier to stick to your budget.”
2. Take advantage of freebies and discounts
Just because you’re budgeting for travel doesn’t mean you have to give up on fun entirely. These days you can find coupons or discount codes for almost any activity, from festivals and sporting events to restaurants and bars. “For example, if you want to go to a concert, look for it on a group coupon site,” says Lent. “Plan on drinking with friends? Ask your friends to check out a happy hour with you.”
There are also plenty of ways to have fun without spending money. Look no further than your local community for meetup groups, free museum or zoo days, or music nights hosted by your city or town. Depending on where you live, getting out into nature is often free, and many national parks even offer free entry on certain days. Entertaining yourself doesn’t have to be expensive – finding no-cost alternatives will enable you to put even more money away in your travel fund.
3. Hack your way to savings with a cashback credit or debit card
Another way to make your travel dreams come true is to use credit card rewards in a process known as “travel hacking,” Lent says. Some credit card providers will give you points or cash back on a percentage of the money you spend overall or in certain categories like food, travel, or gas. If you want to use these credit card rewards for travel, however, Lent recommends paying off your credit card debt each billing cycle.
Some banks also offer cash back when you spend with your debit card. For example, with Discover® Cashback Debit, you can earn 1% cash back on your debit card purchases1 and put that extra cash toward building up your travel fund.
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4. Consider a side hustle
If you feel like you’re not making as much headway as you’d like on your travel fund, you might want to explore some side hustle ideas to earn extra income. Side hustles can range from freelance projects on the weekend to driving for a ride-sharing company.
Pursuing a side hustle isn’t for everyone, but if you have the time and ability to take on additional work, Lent says, you can use the extra cash to fund your travels without dipping too much into your primary source of income.
Your next vacation is one travel fund away
Planning a vacation can be intimidating, especially once you start calculating how much everything will cost. But just like any financial goal, saving money for travel is doable if you have a clearly defined budget and stick to your plan.
Take Lent’s advice: If you want to know how to save money for traveling, determine where you want to go, research how much it’ll cost, and break your savings goal into manageable chunks. You’ll be jet-setting off to your next adventure in no time.
If you’re ready to build your travel fund and make your vacation dreams a reality, check out the features of a Discover Online Savings Account to see how it can keep your travel savings safe and growing over time.
Articles may contain information from third parties. The inclusion of such information does not imply an affiliation with the bank or bank sponsorship, endorsement, or verification regarding the third party or information.
1 ATM transactions, the purchase of money orders or other cash equivalents, cash over portions of point-of-sale transactions, Peer-to-Peer (P2P) payments (such as Apple Pay Cash), online sports betting and internet gambling transactions, and loan payments or account funding made with your debit card are not eligible for cash back rewards. In addition, purchases made using third-party payment accounts (services such as Venmo® and PayPal®, who also provide P2P payments) may not be eligible for cash back rewards. Apple Pay® is a trademark of Apple Inc. Venmo and PayPal are registered trademarks of PayPal, Inc. Samsung Pay is a registered trademark of Samsung Electronics Co., Ltd. Google, Google Pay, and Android are trademarks of Google LLC.
Learning how to budget money on a low income takes work, but it can pay off big if you start early. Here’s how.
November 28, 2023
Starting your first job after school can be exciting, but it also ushers in new challenges. One of the biggest hurdles is making sure you can cover all of your bills and living expenses with your entry-level income.
Taking the time to create a budget can reduce stress and set you up for long-term financial success, says Michela Allocca, founder of the personal finance blog Break Your Budget. Sticking to a budget on a low income in your 20s can get your financial life in order with the right mindset for planning.
Not sure how to budget money on a low income? Allocca explains what a budget is, why it’s important to have one, and how to stick to one—even on a low income.
Why budgeting for young adults is important (especially on a low income)
Creating a budget may not sound like the most exciting way to spend time when you’re young and adventurous. But Allocca says that putting in the work now will make it easier to reach your financial goals and avoid money stress in the future.
In short, a budget is a spending plan based on an individual’s income and expenses, Allocca says. “In its simplest form, it’s how you choose to allocate your funds over a certain period of time,” she says. “It includes the essential expenses that make up your cost of living, as well as your nonessential expenses such as eating out, entertainment, or travel.”
Allocca believes having a budget is helpful at any stage of life, but it’s especially important in your 20s. “Not only does it provide direction on where your money is going, but it draws your awareness to what you are spending your money on,” she says. “This level of awareness makes it possible to nip poor spending habits in the bud early on, as well as ensure the money you are spending is being directed toward things that matter to you.”
How to create a budget that works for you
Younger people are often looking to align their spending with their values, Allocca says, and creating a budget can make your financial dreams a reality. When you’re ready to create a budget, Allocca recommends taking the following steps:
1. Gather information
“First, start by bringing awareness to your expenses,” Allocca says. “Look back at how you’ve been spending pre-budget.” She recommends taking a look at your credit and debit card statements from the last three months. From there, you can figure out the categories, based on your monthly expenses, that you’ll need to allocate money to.
2. Pinpoint your spending
Next, identify what you’re spending on average for each of the various categories of your budget. “You can use your historical information as a guide from the statements you reviewed earlier,” Allocca says. This is especially helpful if you’re thinking about how to budget to pay off debt.
3. Adapt and adjust
No budget is perfect out of the gate, Allocca says. Rather than spending time making sure your budget is flawless, it’s more important to put it into action and iterate as you move forward. “It’s super normal for your budget to shift and change both throughout the month and over time,” she says. “If it’s your first budget, keep an open mind to adjustments, and don’t worry if you are over or under in a certain area at first.”
To build your beginner budget, Allocca recommends using either a budgeting app or a budgeting spreadsheet (her personal preference).
How to stick to your budget over the long run
Creating a budget is the first step toward building a healthy financial future, but sticking to a budget is crucial. Allocca shares some tips for budgeting for young adults, even those who have a low income.
Learn how to say no
“’No,’ is a full sentence,” Allocca says. “In your early 20s it can be easy to succumb to peer pressure or to feel like you need to buy things to keep up with an image. It’s okay to turn down plans if it’s going to stretch your finances too thin or if it just isn’t worth it.” Your future self will be rewarded for making those sacrifices early in adulthood, she says.
Keep your essential expenses as low as possible
Having fewer expenses will make it easier to stick to a budget. “The highest expenses you’ll have are rent and your car, if you have one,” Allocca says. “If you’re in your early 20s, get a roommate or two, and don’t buy or lease a car that is more than 10%-15% of your income.”
Prioritize your value categories
What expenses are most important to you? “You don’t need to do everything, and you don’t need to spend your limited income on anything that isn’t adding value to your life,” Allocca says. “In my early 20s, I prioritized my discretionary income on my gym and my restaurant budget because those two things added the most value to my life.” Or, if you’re learning how to budget to pay off debt, you should prioritize your debt payments in your budget to become debt-free.
How to adjust when your expenses outweigh your income
Allocca says that budgeting for young adults on a low income is very similar to budgeting on an average or even a high income. The formula stays the same, she says: Allocate your income to the appropriate categories.
“The challenging part of having a low income is that you have less wiggle room, which can make day-to-day decision-making a lot harder,” Allocca says. “Don’t let this intimidate you, because a budget shows you how to use your money. It’s designed to be a tool to help you.”
And if your expenses outweigh your income, you can either reduce your expenses or increase your income. “Unfortunately, there is no secret sauce to this problem; it boils down to the math,” Allocca says. “That being said, there are ways to go about this that don’t need to be super overwhelming or stress-inducing.”
First, look at your expenses. If this is your first budget, there are likely many ways to make cuts. Start with unnecessary expenses: What can you live without? Once you’ve trimmed the nonessentials, assess whether you can reduce any essential expenses—whether that means moving to a less expensive apartment or buying produce on sale.
Spending less is a great start, but you can only cut your expenses so much. “The other side of the coin is increasing your income, which isn’t as hard as you think,” Allocca says. She encourages people to pick up a side hustle, such as ride-share driving or delivering food to earn extra cash. “Think about skills you have that you can leverage to earn money online via freelance websites,” she says.
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Take control of your finances today
Budgeting allows you to get a handle on your expenses, spending, and financial goals. Having a budget in place early in adulthood helps you develop healthy financial habits—such as regularly adding to your savings account—and can reduce money-related anxiety, Allocca says.
But budgets are not a one-and-done exercise; your budget should evolve to adapt to your life situation and goals, she says. To stay on top of your changing priorities, try referring to a financial review checklist to ensure your budget is always aligned with where you are—and where you want to be.
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Inside: Are you looking to achieve financial freedom? This guide teaches you the 12 habits you need along the journey. Learn how people changed their lives with simple steps of savings and minimized expenses.
Achieving financial freedom is often misconceived as simply accumulating great wealth.
However, as David Bach, a renowned financial expert and top-selling author emphasizes, “Financial Freedom is about a lot more than money, it’s about living a richer life.” Indeed, true financial freedom is not solely dictated by the figures in your bank account, but more by the ability to live life on your terms, unencumbered by financial restraints.
There are reasons financial freedom is a coveted goal for many. Having more than enough monetary resources to finance your desired lifestyle without being driven by the need to earn a certain amount every year can be liberating.
This post will explain financial freedom in-depth, its benefits, the keys, and simple strategies to attain it.
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What is Financial Freedom?
Financial freedom is understood in various ways depending on people’s personal goals and values. Essentially, it’s having ample savings, cash, and investments to live as desired, both presently and in the future.
Those who reach financial freedom find themselves in control of their money, not allowing it to control them. Imagine enjoying your favorite hobby, traveling, or simply relaxing without stressing about money.
That’s the essence of financial freedom.
Why is Financial Freedom Good?
Financial freedom is a game-changer. It gives you complete control over your finances, allowing you to make choices that align with your values and long-term plans.
Financial independence reduces anxiety tied to unforeseen expenses and offers a safety net during unexpected hardship. It also allows you to work on your terms, pursue passions, take risks, and ultimately, leads to a more fulfilling and happier life.
This is something I can attest to when my husband was able to leave a toxic work environment on his terms.
What is the key to financial freedom?
The key to financial freedom lies in attaining financial literacy, prioritizing your goals, and cultivating good financial habits.
This involves setting and being adamant about your life goals, living within your means, saving diligently, investing wisely, diversifying income streams, and regularly reviewing and adjusting your financial plan.
Control over your finances and informed decisions pave the way toward financial freedom.
12 Simple Strategies for Financial Freedom
Achieving financial freedom requires strategic planning and disciplined execution. It’s not just about earning more, but about saving wisely, spending judiciously, and investing intelligently.
This section introduces you to key strategies for securing financial independence, illustrating their importance and demonstrating their role in paving the way toward a stress-free financial future.
Remember, financial freedom is not just about an affluent lifestyle, but about taking control of your finances, making your money work for you, and living a life on your own terms.
Something we emphasize around here at Money Bliss.
1. Set Life Goals
Setting clear, tangible life goals — both big and small, financial and lifestyle — is the first step towards achieving financial freedom. These smart goals form the backbone of your financial plan.
For instance, you may aspire to own a house, increase your liquid net worth, or retire early. The more specific your goals, with concrete amounts and deadlines, the higher the likelihood of achieving them.
2. Create a Monthly Budget
Creating a monthly budget is an instrumental step towards financial freedom.
Start by taking account of all your income like your paycheck and expenses.
Identify non-essential items you can cut down, and set money aside for emergencies and savings.
Focus on mindful spending and curb the urge to splurge.
Following a monthly budget guarantees that all bills are paid, and savings are progressing at a solid pace. Get solid budgeting advice to help you get started.
3. Spend Less Than You Earn
To reach financial freedom, it’s fundamental to spend less than you earn. This tip may seem overly simple, but it lays the foundation for wealth accumulation.
I cannot stress this concept of spending less and saving more enough. By reducing discretionary expenses and embracing frugality where possible, you maximize savings.
This doesn’t mean an austere life but simply cutting back on unnecessary expenses to create more room for savings and investments.
4. Invest in Your Future
Investing is a path towards creating wealth for your future. Even small amounts invested wisely can have big results, thanks to the power of compound interest.
Whether it’s real estate, the stock market, or mutual funds, investing can generate an income stream and significant long-term growth. This also means increasing your financial literacy to bring direction and discipline to your investment journey.
Learn how to start investing 10K.
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Making $1,000 every.single.day is NOT a pie-in-the-sky goal.
It’s been done over and over again, and the 30,000 students that Teri has helped to be financially independent and fulfill their financial dreams are my witnesses…
5. Stay Educated on Financial Issues
Staying attentive to financial news and developments is crucial. Knowing current trends can aid in timely adjustments to your investment portfolio.
Staying educated on financial issues and increasing financial literacy is an effective step toward achieving financial freedom. This includes acquiring competencies in areas such as understanding debt, budgeting, keeping track of cash flow, and investing wisely.
From changes in tax law to swings in the stock market, keep informed to make well-rounded financial decisions. Remember, knowledge is your best protection against fraud or investing missteps.
6. Develop Passive Income Streams
In your hunt for financial freedom, developing passive income streams can be a great advantage.
Passive income refers to earnings derived from a rental property, selling printables, or other enterprises in which you’re not actively involved. This could be writing a book, starting a blog, or investing in stocks.
These income streams can dramatically boost your earnings and aid your journey to financial freedom.
7. Diversify Your Investments
Diversifying your investments is a key strategy to mitigate risk and potentially increase returns. Remember the statement of don’t put all of your eggs in one basket.
Portfolio diversification involves spreading investments across different asset classes – such as cash, stocks, bonds, and real estate. Diversification ensures downturns in a single area won’t devastate your finances.
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8. Maintain Your Property and Health
Maintaining your property and health is vital to your financial wellness. Regular care and maintenance for your properties, like homes and cars, help prevent expensive repair costs in the future.
Investing time and effort in your health, with regular doctor visits, a healthy diet, and exercise, prevents long-term costly health issues, securing your financial future. This is why I decided to share my spinal fusion journey to help others because your health is vital to your wealth.
This investment is integral to a life of financial freedom.
9. Build a Retirement Savings Plan
Building a robust retirement savings plan is a significant step towards financial freedom. Contributing to a 401(k) or an IRA can lead to tax advantages while saving for retirement.
Here is the key to success: don’t wait to start saving for retirement until you feel like you have extra money lying around. Because that will never happen.
Start simple by maxing out your Roth IRAs and contributing enough to your employer’s 401k to receive any matching. Initiate early and let the compounding interest work in your favor for a secure retirement fund.
10. Calculate Your Financial Independence Number
Your financial independence number is a benchmark for your financial freedom goals. I’ll be honest this is one of the hardest things to do is calculate how much you need to retire.
Recently, I had a conversation with someone who retired early and she said it is so hard to know how much you need and then also live off your savings.
However, calculating this FI number can provide a roadmap for your financial freedom journey.
11. Increase Your Income
Increasing your income can expedite your journey to financial freedom. Around here at Money Bliss, we stress the need for multiple streams of income.
Consider asking for a raise, taking on more responsibility at work, or learning new skills to command a higher salary.
Explore side hustles fitting your skills and interests. This may lead to a new career for you!
And don’t forget about passive income.
Generating more income not only enhances your lifestyle today but also boosts your savings and investments for a financially free tomorrow.
12. Regularly Review and Adjust Your Financial Plan
Your financial plan is not a static document but a living, changing guide. As your life and goals evolve, so should your financial strategy.
Regularly reviewing your plan helps assess your progress, make necessary adjustments, and keep you focused on your financial freedom journey.
This is something you need to prioritize on your calendar.
Dealing with Debt in the Path of Financial Freedom
Our journey of student loans was deeply intertwined with our pursuit of financial independence as we wanted more money in our budget. This systematic approach not only expedited our progress but also instilled a discipline that prepared us for a future of responsible financial decisions.
While not easy, it is best to pay off debt sooner than later.
Prioritize Paying Off Debts
Addressing debt is imperative on your financial freedom journey. Prioritize paying off debts, particularly high-interest ones. This could mean scaling back your lifestyle temporarily.
You might find strategies like the debt snowball method, paying off the smallest debts first, effective. Or the debt avalanche as we chose. Find out which way to debt payments is best for your situation.
Clearing debts reduces monthly bills and creates more room in your budget for saving and investing.
Minimize Reliance on Borrowings
If you are consistently relying on debt methods to make ends meet, that needs to stop. Instead of taking loans for significant purchases, it’s more beneficial to accumulate savings first and then purchase in cash. For instance, when looking at car loans, the interest rate is pretty high, so this is a great example to save first.
This is backward of what most people do. However, it provides wise decisions with your money like having an emergency fund to fall back on.
Just to note… for most people, a mortgage may be cheaper than renting in their area.
Commit to Debt Free Living
Committing to a debt-free lifestyle is not about sacrificing everything today for tomorrow, but about making smarter financial choices. These include fully paying off credit cards each month, preparing a budget and sticking to it, and systematically paying off any existing debts.
Over time, these actions lead to a reduction or elimination of debt contributing significantly to your financial freedom.
Achieving Financial Freedom: Success Stories
There is no shortage of inspiring stories of people going from rags to riches or overcoming financial hardships to achieve financial freedom.
One notable example is the story of Grant Sabatier, who went from having only $2.26 in his bank account to reaching financial independence in just five years.
Similarly, Kristy Shen was an ordinary programmer who quit her job and, with calculated financial decisions, managed to retire as a millionaire.
Farnoosh Torabi, a celebrated financial correspondent, was once overwhelmed by $30,000 in student loan debt. Through disciplined budgeting and effective money management, she was able to shake off the chains of debt and now leads a financially free life.
Likewise, Robert Kiyosaki, the author of “Rich Dad Poor Dad,” started his journey with little and is now known for his financial education organization.
There are numerous success stories affirming the attainability of financial freedom. These success stories inspire and offer valuable insights into achieving financial freedom.
Frequently Asked Questions (FAQ)
Financial freedom means having sufficient savings, investments, and cash at hand to afford the lifestyle you desire without being burdened by economic constraints.
In essence, it’s about more than just having money – it’s about having financial choices, control, and security to live life on your own terms, both now and in the future.
Achieving financial freedom isn’t about get-rich-quick schemes. Instead, it typically involves a combination of saving, investing, and increasing your income.
This can mean anything from asking for a promotion at work or starting a side business to investing in stocks or real estate. Building multiple income streams, particularly passive ones, and maintaining a disciplined budget can significantly speed up the journey.
The amount of money required to attain financial freedom varies from person to person, as it’s highly dependent on individual lifestyle aspirations and expected annual expenses.
A general rule is to multiply your expected annual income by 25. For example, if you need $50,000 a year for your dream lifestyle, your financial freedom amount would be $1.25 million. It’s crucial to reassess this number regularly and adjust for changes like inflation. Learn more on saving for retirement.
Create Financial Freedom Journey for Yourself
Achieving financial freedom is a journey, not a destination. It demands consistent effort, discipline, and wise decision-making.
Every step you take towards reducing debt, saving, investing, or earning more income brings you closer to a life self-directed rather than dictated by economic constraints.
You have the opportunity to change your family’s future for many generations to come.
Although challenges will arise, remember, as Arthur Ashe once said, “Start where you are. Use what you have. Do what you can.” With determination, you can achieve financial freedom.
Start by learning to become financially independent and grow from there.
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When Caleb Pepperday and his wife secured a 2.75% mortgage rate on their home in Pittsburgh in 2021, the young couple couldn’t believe their luck. Buying when interest rates were at historically low levels in the U.S., the Pepperdays received one of the most enviable loans in home ownership.
Just two years later, the couple sold to move to Montana—losing the rate and becoming renters again in the process. “We thought we were going to stay in that house for a long time,” Pepperday, 27, tells Fortune. “But things change.”
While he and wife don’t regret the move one bit—they and their entire generation are wishing there was a way to turn back the clock to the glory days of low mortgage rates. Right now the 30-year fixed rate hovers around 7.7%, which is not historically high, as many members of older generations are quick to point out. But when coupled with the outrageous price of the median home, now standing at over $412,000, many would-be homebuyers feel locked out of the market. In fact, affordability hit a 38-year low in September.
Millennials were late to home ownership for myriad reasons, including higher student debt burdens, wedding later in life, and rapidly rising rents. When rates dropped, it felt like a once-in-a-lifetime opportunity for some to finally get into the market and buy their dream home. Now that rates have doubled, that dream is fading once again: One in five millennials now says they will never own a home, according to real estate brokerage Redfin.
But Pepperday, a certified financial planner (CFP), encourages his fellow millennials who believe they lost their last shot at home ownership to reframe their thinking.
“The mindset of, if you don’t buy now you’ll miss out forever, I don’t think that’s true,” he says. “Interest rates are simply out of your control, so fretting about them doesn’t really do you much good. It’s easy to second-guess yourself and say what could have been, but focus on what you can control.”
Here’s the advice he and other financial experts have for millennials who feel they missed out on a golden housing opportunity.
1. Take your time
There’s likely a good reason you didn’t buy when rates were low, even if you had the funds to do so, says Sean Williams, a Maryland-based CFP. You might not have known where you wanted to live, or you couldn’t find the right space, especially given the tight inventory.
Remember those reasons. It’s a mistake to compare yourself to others, rush into making one of the biggest financial decisions of your life, and potentially force something that could put you in a huge long-term financial bind, he says.
Don’t get caught up in the should-haves or would-haves and make a rash decision—do what makes sense for your household. If you need a cautionary tale, Fortune previously reported upwards of 40% of recent buyers regret their decision, but feel locked in due to their low mortgage rate. (And that low rate doesn’t preclude you from shelling out for a ton of other unexpected costs you wouldn’t have renting.)
“Patience isn’t fun, but it can yield great dividends,” Williams says. “Something greater could await you, and you’ll miss it if you keep looking back.”
2. Use this time to prepare
Those are set on buying shouldn’t be dissuaded by higher rates, Williams says. Though inventory is low, housing hopefuls can use this time to build their credit, scope out mortgage lenders, explore neighborhoods, and better understand what they want in a home and what they can afford.
“Take the time to understand the transaction,” Williams says. “It won’t be a waste of time if you’re incrementally bettering your position for when the time is right.”
And remember all that regret? While owners may not want to sell now, they won’t hold out forever if they aren’t happy in their home, no matter how low their interest rate, Williams says. That will open up more inventory, which buyers can snap up—if they’re prepared.
“Home values can move. And so can interest rates,” he says. “It’s sort of like investing in the market. You can look back and say, ‘Oh, I could have timed it.’ But it really makes sense to put yourself in the best financial position possible no matter the season.”
3. Look into alternatives
Though a 30-year mortgage is the most traditional option—and typically the headline figure—Dottie Herman, vice chair and former CEO of Douglas Elliman Real Estate, advises homebuyers to look into alternatives, such as five-year ARMs, which can offer lower introductory interest rates than conventional loans, or other forms of “creative financing.”
“I tell so many young people, it’s kind of a cliché that people use 30-year mortgages, because people don’t live in houses for 30 years anymore,” Herman says. “Go sit with your mortgage broker or banker and educate yourself on the different mortgages available.”
There are also grants and first-time homebuying programs that can make the process easier and more affordable. And Herman says to remember that you can always refinance in the future. If you find a home you like now that you can afford, it can still make sense to buy. You won’t get a sub-3% rate, but that doesn’t mean it’s not a worthwhile purchase. There will never be a perfect time.
Higher rates “would not stop me from buying a home. If you’re looking, you should not stop looking,” she says. “No one can time the market, so you just have to wait for a time that you can refinance.”
Finally, Pepperday says to consider whether home ownership is right for you at all, or if you just want to buy because it seems like the socially acceptable thing to do. Yes, it can help build wealth—but so can plenty of other financial moves, he says. Don’t put your life on hold for one financial choice.
“We are spending less on housing costs as a renter than when we owned,” Pepperday says. “Of course over time we’re not building any equity, but we have additional cash flow that we can use to put toward other investments that have more flexibility to get to the money than what a home has.”
The worst thing you can do, according to Pepperday, is stretch yourself to buy a home you can’t afford, just because you think it’s something you “should” do. “Don’t make yourself house-poor.”
“I think of you every time I buy soap,” says the young woman, a friend of my daughter’s from college. We are chatting at a wedding. “Triple-milled,” she continues. “Your daughter drilled this into my head.”
I’m not sure how to take this.
“Well, I’m glad some lessons have sunk in,” I say.
My son-in-law overhears this exchange and chimes in, “How about the time she said that if anyone ever smothers her with a pillow, she hopes it has a 400-thread-count, Egyptian cotton pillowcase.”
“I said that?”
He nods vigorously. I don’t recall that, but It sounds like the way I would want to go.
Though the soap-and-linen dialogue may seem trifling, it lies at the heart of a topic I’ve thought a lot about and written a lot about this past year —rightsizing. It’s the subject of my next book, which will come out in January.
Here I thought I was addressing my generation when exploring how to decide where to live, in what size house and with what stuff to create a rightsized life, but the younger generation is tuning in, too. Living a rightsized life means not only having just enough house in just the right place, but also furnishing it with the fewest, best-performing household goods possible.
The message applies to all ages.
That means choosing only those sheets, towels, soaps, knives, pans, wineglasses, furnishings and other household basics that excel at their jobs and that elevate your life. Owning fewer, higher quality items leads to living large while spending less. It’s the key to gracious, clutter-free, rightsized living.
Imagine no more sheets that don’t fit right and don’t breathe, no more towels that aren’t thirsty, no harsh bath soap that dissolves into the drain after three showers, no pans that scorch your food, no pillows that fall flat, no sofas that you avoid because they aren’t comfortable. Instead, everything you have is a pleasure to use and look at and live with. It was all money well and thoughtfully spent.
Unfortunately, many homes are filled with the opposite: subpar products that aren’t quite right, that don’t quite work, and that we continue to buy wrong, because we don’t always know how to buy them right. Then, because we feel guilty getting rid of these barely used items, they clog our cupboards, closets, and lives … unless we learn how to buy them right.
That was part of my aim when I wrote this book, because I love nice things but hate to waste money. I wanted to discover — and help you discover — the luxury of less. So I interviewed experts on the various staples needed to outfit every room of the house, from tea towels to sectionals, and teased out what makes some items exceptional and how to buy those everyday items right.
Here’s the SparkNotes version so you, too, can buy once and buy right.
Study up. Become a student of quality. Look beyond the brand, packaging hype and marketing ploys to discover the properties that make a product the best in its class. To pick great household products out from a noisy and confusing line-up, learn about the production process, the materials used to make them and when to choose one material over another: linen or cotton, crystal or glass, cast iron or stainless-steel? Understand why you should choose hand-knotted rugs over machine-made ones, triple vs. single-milled soap and the best chromium-nickel ratio in flatware (18/10).
Avoid cooking sets. Big box sets of pots and pans and knives seem like a bargain, but they contain filler pieces you will likely never use. Buy good pans and good knives one at a time.
Try before you buy. Before investing in a full set of sheets or towels, buy a pillowcase and a face towel. Use them, wash them and use them again to make sure you like the feel and function. You can also test drive area rugs by purchasing (and returning) the smallest size — 2 by 3 feet — and seeing how the colors and pattern look in your home before you invest in the 9 by 12.
Okay, so you’re tired of puttering along in that same 1996 Honda Civic with which you picked up your Homecoming date during your senior year of high school. How do you even begin? No doubt, you’ll have questions to ask when buying a used car. Well, first, you need to narrow it down to which car you want, what options you want/can live without, your budget, etc. Once you’ve gotten that down and have taken a few cards for a spin, it’s time to get down to business.
I bought my first car just about ten years ago and have bought and sold seven cars within that time frame. Except for one, I made a profit off every single one of them. For example, My INFINITI G37 just stole my heart. I got such a good deal on it (I bought it for $4,700 under dealer internet price) that I made the conscious decision to take a loss by keeping it longer and thus having to deal with depreciation.
However, it never needed any maintenance for the six years I had it other than $40 oil changes periodically. So, considering all costs (parking, annual registration, gas, car insurance, and depreciation), the car probably cost me $150 per month over those six years. That’s well below what some friends spent on the luxury of ride-sharing.
What to Ask When Buying a New Car
When you’re ready to buy a used car, you want to come armed with questions. Ensure you’re informed, and then you come across as a knowledgeable buyer and ward off any unscrupulous sales tactics.
#7. When Is the Best Time to Buy a Used Car?
We’ve all seen those charts on the best time to buy everything from winter apparel to laptops. But did you know there is a sweet spot for buying cars, as well? Buying towards the end of the month and even the end of the year is your best bet. Why? Because dealerships have quotas to meet, salespeople are hungry to get one last commission for their paycheck.
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As far as the end of the month, most dealerships close the books, project that month’s sales amounts, and try to move inventory to keep the interest fresh. You may know that when new models come out and leases get returned, the used car market is usually more flexible, which means more selection and a better price for you.
If you’re daring, go into the dealership on a Sunday evening during unpleasant weather when they’re hungry to meet quotas. If you’re paying cash, and you’re there with money in hand, they’re much more likely to get you a good deal. Make sure you come with evidence of comparable models elsewhere.
#6. Why Is Buying Used Better Than New?
While many people justify their decision to buy new as having a more reliable vehicle and spending less on repairs than an older car, cars have markedly improved their dependability over the last 10-15 years.
Plus, many online tools help you with price transparency, find service records, and owner/expert reviews. You’ll find anything you want to know about the car you’re considering over the last decade.
According to a recent report, new cars lose up to 20% of their value after the first year. And then they depreciate more than HALF their value after five years. On a $32,000 car, that’s almost a $7,000 hit after just a year of driving! On the other hand, you can easily buy a car that’s just a few years old and let someone else take the depreciation hit.
Besides houses, cars are generally the most expensive purchases you’ll make. Buying used enables you to strategically get a reliable vehicle that can last you years without breaking the bank. My neighbor once bought a 4-year-old Honda Accord for $12,000 and still drives it ten years and 90,000 miles on the odometer later!
#5. Why Is Buying Better Than Leasing?
According to Consumer Reports’ comparison for buying versus leasing, the average cost of a new car has now topped $38,000. You might think to yourself, “I don’t have $38,000 laying around!” Well, take a step back and a deep breath, realizing this is average. Meaning, you can easily find cars for less than this amount. Plus, just another reason to look at a mint used car!
Leases can be appealing because they enable the consumer to drive a new car for a monthly lease payment. Lenders are happy to collect the interest! And then, you return the vehicle at the end of the lease without worrying about maintenance or repairs. Leasing is ideal for people who like to have the newest car (and can afford it) or deduct leasing expenses like realtors. And yes, if you’re wondering about this question, you can lease a used car as well. However, there are mileage limits, and if you lose your job or have a child, you typically can’t just hand the keys back without penalty.
Buying a car means you can drive it freely and have something of value that you can sell when the need arises. With leasing a vehicle, you typically have to either return it, have nothing at the end of the lease, or pay off the car at an agreed-upon amount when you lease the vehicle. For these reasons, buying a car is the best option for most people.
#4. How Many Miles Should a Used Car Have?
Congratulations, we’ve convinced you to buy used! Well, hopefully, you’re empowered to ask questions and find and buy a quality used car, over lining the dealership’s pockets with a new one. Mileage is an essential factor to consider, and the lower mileage, the better. Think about it, cars don’t run forever. So, there’s a cap on mileage before the vehicle is pretty much worthless. (though if you want to see some impressive machines with millions, yes millions of miles, check out this car.)
Most people drive about 10-12,000 miles per year. And with ever-changing technology, it might be best to keep it under 100,000 if you plan to keep the car for a while. After 100,000 miles, more expensive servicing like timing belt change, transmission replacement, and electrical repairs come along.
Consumers who question a used car’s value can turn to The Kelley blue book as an excellent resource when buying or selling. I have found that buying cars with low-mileage, i.e., under 30,000, is the sweet spot if you can snag a good deal because it still feels new. These cars usually come with the balance of a new or extended warranty and yet have decent value locked in. Bonus points if you flip it a year later for a profit as I did!
#3. What Are the Benefits of Buying a Used Car from a Dealer?
You can compare buying a certified pre-owned (aka used car) from a dealer instead of a private party to purchasing a laptop from the store versus a seller on Amazon. You typically get more hand-holding and a concierge process with inspection of the car, service and registration assistance, etc. Yet, that comes with a price.
Buying a used car from a dealer means there’s no question: they have to stand behind that car and not sell you a lemon because their reputation lies on that. So, peace of mind is a big plus when it comes to buying from a dealer. Also, you can typically find more variety in what you want and have someone reach out to you when they get something closer to what you’re looking for. You can also negotiate free service for a year, a multi-point inspection, printouts of service records, and things like replacing the tires at a reduced cost. Moreover, suppose haggling, negotiations, or dealing with salespeople make your stomach churn. In that case, you can always pay a slight premium for peace of mind by using a service like Carvana or Carmax.
Buying from a dealer can also help you make sure you get your title and tag done correctly. One thing to look out for is some dealerships charge a Dealer or “Document Preparation” fee, which can be hundreds of dollars in some states. Be sure to understand what value they’re providing for that fee and where it goes. Few waive them and even charge their employees that fee.
#2. What Are the Benefits of Buying a Used Car Privately?
How do you save the MOST amount of money when buying a car? Well, you buy a pre-owned vehicle that already got whacked with depreciation and cut out the middleman. By middleman, I mean the dealership.
Now, you read about the perks of buying through a dealer and all the peace of mind it brings. So, why bother dealing with the hassle and uncertainty of a private party? Well, the significant cost savings, of course! There’s no dealer doc prep fee, no markups to pay for payroll or overhead, and no burdensome certification process. Buying a used car privately gives you the best chance of getting a great deal if you ask the right questions.
In simpler times, a handshake and trust were all we had to go off before things like CARFAX reports and AutoCheck. When you find a private seller, you can find out the vehicle history. For example, if they were the original owner, who drove the car, why they bought it, and how it’s been treated over the years. Also, you’ll have to make sure they have the title free and clear. Otherwise, you’ll want to go to the bank and have them call the company that holds the title to make sure the loan gets paid off before any other money changes hands.
#1. What Are the Best Ways to Find a Used Car?
Now how do you go about finding a used car? There are many more online tools at our disposal than ever before. Do you remember the times when you would flip to the classified section of the newspaper to find boxes of 6 point font describing a car for sale? Or you saw a car parked on the road with a “For Sale” sign? How times have changed.
Now, you can easily find any car you want online, know everything about it, see high-resolution pictures of its every angle. And you don’t even have to limit yourself to your geographic area!
The thing to know is most private-party sellers will usually try to sell their car for free or cheaply. So, be sure to start your search by scanning Craigslist, Cars.com, and Facebook Marketplace.
Expand Your Search
Now, if you’re looking to expand your search across the state or nation, check out cars.com, Cargurus.com, and Truecar.com. All of these sites provide decent vehicle descriptions and history, such as accident reports.
Cars.com has a very user-friendly interface and easy navigation filters for color, features, cloth/leather, etc. It also has a price analysis tool to let you know if that particular car is a “good” or “great price” as compared to other vehicles for sale.
CarGurus is also user-friendly and has a similar price comparison tool. Also, it’s got a cool little “negotiation” section in the description. It tells you how long the car has been on the market and its different price changes. It can give you a glimpse of how motivated the dealer is to get rid of the vehicle. I love CarGurus because it answers the most basic questions I’d ask about the used car I’m thinking about buying.
Finally, TrueCar has a unique pricing analytics report that will tell you what you can expect to pay based on what similar vehicles have sold for. They also can offer a unique “personalized offer” on a car, which might be lower than other sites, in exchange for inputting your contact information. It might be an easy trade to shave a few hundred off your car purchase!
Final Thoughts about Buying A Used Car
Consumers looking to buy a used car certainly have to ask a lot more questions than when buying new. But, the extra work will save them thousands in unnecessary depreciation. The key is to do your homework and get the car inspected. That way, you’ll come out ahead by knowing the car’s history. And don’t be afraid (ever) to walk away from a bad deal!
Almost 120 million Americans pay with plastic for the perks.
More than a third (47%) of American adults say they’ve used a credit card solely to rack up rewards points, according to the latest Chasing Points study from Finder, an annual study of roughly 1,800 American adults about their credit card spending habits. That’s about 119.8 million of rewards cardholders, up 38% from the 2019 survey’s 87.1 million who admitted to the same.
Even though more adults are swiping their credit card for the points than last year, they’re spending less on average. Our study found that Americans cardholders charged an average of $1,179.36 each to take advantage of loyalty programs associated with their rewards cards, a decrease of -35% from an average of $1,814.75 last year.
However, while more people than last year appear to be pulling out plastic in the hunt for rewards, the total amount they’re spending is on the way down. Americans spent $141 billion on their credit cards for rewards, which is roughly 11% less than the $158 billion spent in the previous year, the second year in a row of a decrease in rewards spending.
What Were People Buying?
Finder’s study found that of the nearly $1,179.36 spent by American cardholders looking to earn points on their purchases, they spent the most on groceries on average ($505.01), followed by dining out ($139.48). Flights ($118.99) and hotels ($90.31) come in next, showing that American cardholders are looking for an escape despite COVID-19 restrictions.
Responses
Amount Spent% of respondents
Total spend
Groceries
$505.01
$60.5 billion
Dining out
$139.48
$16.7 billion
Flight
$118.99
$14.3 billion
Hotels
$90.31
$10.8 billion
Household items
$86.13
$10.3 billion
TV / computer purchases
$78.86
$9.4 billion
Other
$67.83
$8.1 billion
Shoes
$44.75
$5.4 billion
Cosmetics and fragrances
$27.22
$3.3 billion
Literature
$11.15
$1.3 billion
Music
$9.63
$1.2 billion
Let’s break it down
Gender
Of our respondents, men both spent more and are more likely to buy with a credit card just for the rewards. Some 51% of men say they’ve paid with plastic for points, and they’re spending an average of $1,291.88 a year on their cards, compared with 43% of women who charge at an average of $1,059.66 a year.
In 9 of 11 spending categories, men are more likely than women to spend money to get points. Women are slightly more likely than men to spend money on groceries and cosmetics/fragrances.
Responses
Men
Women
Groceries
$488.90
$522.16
Dining out
$164.09
$113.29
Flight
$157.63
$77.89
Hotels
$108.39
$71.07
Household items
$88.66
$83.44
TV / computer purchases
$106.56
$49.38
Other
$77.79
$57.23
Shoes
$50.21
$38.95
Cosmetics and fragrances
$22.74
$31.98
Literature
$13.20
$8.97
Music
$13.70
$5.30
Total
$1,291.88
$1,059.66
Generation
We all gotta eat. And across generations, groceries are the top purchase for credit card points hunters. It’s also the category in which all generations spend the most.
Generation
% that said they made a credit card purchase for points
Average spend
What they’re most likely to buy
Gen Z
47.57%
$479.89
Groceries
Millennial
49.15%
$990.95
Groceries
Gen X
51.18%
$1,170.49
Groceries
Baby Boomers
41.09%
$1,473.46
Groceries
Silent Gen
45.71%
$1,683.58
Groceries
The generation most committed to racking up loyalty points? Gen X, with 51.18% admitting to using a credit card for points, followed by millennials (49.15%) and Gen Z (47.57%).
However, baby boomers spend the most on average on rewards cards across the board, averaging $1,473.46 per person, followed by the silent gen ($1,683.58) and Gen X ($1,170.49).
Household Income
It may not shock you that the more money people have, the more likely they are to spend money on their credit cards to score loyalty rewards. 63.25% of cardholders who earn more than $120,000 say they made a credit card purchase for points, compared to only 31.81% of those making less than $20,000. However, although adults earning $120,000 or over were mostly likely to spend, cardholders with an annual income of $80,000 to $99,999 spent the most on average at $1,583.63.
Household income
% that said they made a credit card purchase for points
Average spend
Less than $20,000
31.81%
$679.14
$20,000 to $39,999
40.47%
$870.53
$40,000 to $59,999
51.13%
$1,326.52
$60,000 to $79,999
58.80%
$1,487.66
$80,000 to $99,999
53.02%
$1,583.63
$100,000 to $119,999
63.16%
$1,272.49
$120,000 or over
63.25%
$1,382.92
Are Rewards Programs Worth It?
Rewards cards can offer incredible perks. But whether they’re the right choice depends on your financial needs, spending habits and goals. Weigh the pros and cons of your rewards card, and map out how much you need to spend to reap the biggest rewards.
When looking for a card, caarefully read any limits and restrictions on how you can redeem points, and look for eligibility on bonus points at signup. The potential for travel perks, cash back and bonus points could cause you to spend more than normal, potentially resulting in high fees and interest on those purchases.
COVID-19 has changed the way many people have used their credit cards in the past year. As a result, many providers have updated their rewards structure to reflect what people are spending most on during the pandemic (such as more rewards for spending on streaming services and less for travel).
Our data is based on an online survey of 1,790 US adults born between 1928 to 2002 commissioned by Finder and conducted by Pureprofile in September 2020. Participants were paid volunteers.
We assume the participants in our survey represent the US population of 254.7 million Americans who are at least 18 years old according to the July 2019 US Census Bureau estimate. This assumption was made at the 95% confidence level with a 2.32% margin of error.
The survey asked respondents whether they have spent on a credit card because of the rewards program and, if so, how much have they spent in the past 12 months.
We define generations by birth year according to the Pew Research Center’s generational guidelines:
Have you found yourself contemplating flipping a house for the first time? Or you’ve flipped a house in the past, and something went terribly wrong. Now you want to know what other home renovators are and aren’t doing.
Whether you’re searching to flip a house in Ventura, CA, or a home in Las Vegas, NV, this Redfin article offers valuable tips to save time and money. From selecting the best location to choosing a reliable contractor and marketing your property, we’ve got you covered.
1. Do consider the location
Choosing a location is one of the most important factors when you flip a home. For starters, if you plan to actively participate in the renovation process, you’ll want to ensure the commute is close. However, to assemble the right team (contractors, painters, designers, etcetera), you’ll also want to be sure that anyone working on the home can access it readily and isn’t deterred by the distance.
Now, from the perspective of when you go to sell the property, location is equally important. Flipping a home in an area with active demand for your listing can make or break the deal. If you plan to keep the property as a rental, consider both short-term and long-term demand. Would it be best to be located near the city for visitors to access hot commodities quickly? Or is the home a retreat tucked away from the hustle and bustle of the world and instead amongst the quiet wilderness?
Rui Wang, is the VP of marketing for Ark7, an online platform for investing in fractional real estate. She recommends having a rental property near an urban center. This will boost occupancy rates and give easy access to travelers.
2. Do budget accordingly
Numbers are critical when it comes to flipping a house. Spend too much, and you’ll find yourself at a financial loss. On the other hand, spending less may find yourself struggling for occupancy or buyers.
Real estate finance gurus, BiggerPockets, discuss the importance of calculating after-repair value (ARV). What is the property going to be worth after repairs? To determine a property ARV, you must know its current value, the value of the renovations, and perform a comparable market analysis (CMA). A good rule of thumb to help you along the way is the 70% Rule, which states that you shouldn’t pay more than 70% of the ARV minus the repairs needed.
Konstantin Podyachev, CEO of Expo Home Buyers, recommends “setting aside a buffer of around 10-15% for unexpected expenses.” These expenses can arise throughout the renovation process; the last thing you want is to be financially strung out. In the best-case scenario, everything goes according to plan, and the 10-15% stays in your pocket.
3. Do consult with a real estate agent
Even before you purchase a home to renovate, you’ll want to consult a real estate agent. Agents are equipped with a vast knowledge of the area you desire to purchase and can guide you through the process. From learning about recently sold or leased homes comparable to your vision, it’s essential to understand what you’re up against.
Additionally, assembling a team of contractors, designers, appraisers, and inspectors can be challenging. Having a real estate agent as a guiding resource to connect with those individuals can be a step in the right direction.
4. Don’t assume your plan can’t be derailed
Try to assemble a foolproof plan when beginning the process of renovating a home; however, don’t expect it to stay that way. If you plan to reconfigure the layout by demolishing walls or ripping beneath the surface of the floors, you never know what may be discovered.
Termites, asbestos, mold, and other jarring, plan-wrecking things may be found beyond what the eye first sees. Before purchasing a property, perform due diligence and have an inspector review the house. They should look at everything from sewage pipes and water lines to foundation and structural integrity.
Bobbie Wasserman, Founder and CEO of Single Lady Estates, shares to bring in a specialist if concerns arise. “Their insights can provide you with a comprehensive understanding of the current state of the home’s critical (and expensive to repair) systems.”
5. Don’t cut corners, but don’t over rehab
The lowest contractor bid is constantly enticing. However, before deciding, be sure you’re asking to see a portfolio of anyone’s work (maybe even touring a current project). Another helpful tip is to read reviews or connect with someone they’ve worked with before to hear firsthand how well they executed their vision.
Will Rugeley, marketing manager for Good Vibes Homebuyers, shares that in 2020 their team bought a home for $15,000, sold it for $143,000, yet lost $8,500. This happened because they chose a contractor with the lowest bid before vetting them. Based on early estimates, Will and his team were significantly over budget as expenses continued to arise. He now advises “being wary of strangely high or low rehab estimates.”
6. Do consider the design
You’ve considered the location; now it’s time for the fun part, crafting the home’s design. First and foremost, decide if you’re going to design it yourself or if you’re going to hire a professional interior designer.
Designing a home as a short-term rental (such as an Airbnb or VRBO) can be much different than how you’d create one for a long-term rental or to sell. For short-term rentals, Wang suggests molding each room into a “functional oasis, where guests are treated to both essential amenities and supreme comfort.”
When designing a long-term rental or selling property, the saying “less is more” may be helpful. Consider prospective buyers or renters touring your magnificently curated property; you’ll want them to picture their life in the home. That life may mean leaving room for accent walls or taking inspiration from what you’ve already designed and offering a higher price tag for added features.
7. Don’t forget about marketing
After pouring your heart and soul into designing the perfect property, the last thing you want to forget about is marketing. Your real estate agent will be the greatest asset for introducing your home to potential buyers or renters.
The experts at Old Pueblo Stucco share the reminder of creating stunning curb appeal so that there is a “wow” factor at first glance. Hire a photographer or videographer to capture the best angles of everything that makes your home unique. Additionally, be sure you (or your agent) have written an attractive copy that will be front and center within the property description, highlighting all the best features.
Final thoughts on do’s and don’ts for flipping a house:
Flipping a home can seem extraordinarily overwhelming. Remembering integral parts can serve as your guiding light from start to finish. Learn from people along the way, consult experts, and continue diving into online resources available when you need clarification.
Beyond the challenges and the windy road that is “do this” or “don’t do that” lies an incredible experience of what is your piece of art coming to life.