Want to boost your savings and make every paycheck count? As a budget-saver, I’ve spent years uncovering the most effective strategies to help you grow wealth.
In this article, you’ll read the top eight money moves to make as soon as your paycheck hits your bank account. These proven tips will help you save more, invest wisely, and build a rock-solid financial foundation for long-term success.
1. Find Your Financial Baseline
The first step is to find your financial baseline by recording all your monthly expenses in a spreadsheet. This helps you discover how much you need to survive each month with your current lifestyle.Remove non-essential expenses like Netflix, Staplers, and Candy Crush subscriptions. Yes, you want to look carefully because maybe your Netflix keeps your headspace clear so you can get to work every day. But you can do without many of these subscriptions. Once you do that, you can find your core expenses. Standard expenses usually include housing (rent or mortgage), groceries and food, insurance, and utilities.
2. Build an Emergency Fund
Having an emergency fund is crucial for financial stability and peace of mind. Please save up to six months’ worth of expenses in your bank account to cover unexpected costs like car accidents, job loss, or illness.Mathematicians explain the importance of an emergency fund using Murphy’s law, which states that everything that can go wrong will go wrong. And it’s true, but you can outsmart Murphy with your new forward-thinking attitude.
3. Pay Off High-Interest Debt
Paying off high-interest debt is the next priority after building an emergency fund.Note that an estimated 77 percent of American adults are in debt, which can strangle your monthly income and limit your ability to save and invest.
4. Start Investing
Investing is crucial for building long-term wealth.The stock market returns about 10 percent a year over time. This means your money will double every ten years without you having to do anything.
If you invested $6,000 yearly from age 25 to 65 with an annual return of 10 percent, you would have a whopping over $2.7 million in your investment account.
5. Prioritize Investment Accounts
Knowing which investment account to prioritize will maximize your returns and minimize your taxes.First, contribute to your 401(k) account, or a workplace retirement plan that offers matching contributions (essentially free money).
After maxing out your employer match, contribute to a Roth individual retirement account (IRA) account. This will allow you to withdraw your contributions anytime without paying taxes on the earnings. Finally, invest in a regular taxable brokerage account.
6. Invest Consistently
Do not fall for the common mistake of timing the market. Timing the market involves stopping investing or pulling money out when the market is down and trying to get back in at the right time.The best solution based on hard data and math is to consistently invest a fixed monthly amount, regardless of market fluctuations.
This dollar-cost averaging strategy minimizes the cost per share you pay for your stock over time.
7. Buy Back Your Time
Time is the most valuable resource, so please consider the opportunity cost of time.8. Automate Your Finances
The most important step is automating your finances to avoid decision fatigue and consistently pay bills, save, and invest. I recommend automatic transfers from your paycheck. Automate the money into a spending account (for fixed monthly bills and essential expenses) and a savings account (for emergency funds, debt repayment, investing, and opportunity costs).Automating your finances can save time and headaches in the long run.
- finding your financial baseline,
- building an emergency fund,
- paying off high-interest debt,
- starting investing,
- prioritizing investment accounts,
- investing consistently,
- buying back your time,
- and automating your finances
