Greg Johnson is a personal finance and frugal travel expert who leveraged his online business to quit his 9-5 job, spend more time with his family, and travel the world. He is the co-owner of the popular blog Club Thrifty, where he teaches others how to spend less and travel more.
Let’s face it: Getting ahead can be tough. If you believe everything you read, it may seem almost impossible.
Don’t get caught up in the negativity, though. Most of that babble is beyond your control anyway.
However, there are plenty of things you can do to improve your situation. It is possible to secure your finances and build a life you want to live. Focusing on these eight things can help you take control of your money once and for all.
- Don’t Waste the Power of Compounding Interest
The sooner you start investing your money, the more money you’ll make over the long run. Financial writer Ron Lieber tweeted a chart of just how powerful compound interest can be. For example, if you started saving just $250 a month at age 25 and earned an 8% return, you’d have over $878,000 at age 65. If you waited until you were 35, you would only end up with $375,073. And if you waited until 45, your saving efforts would only earn you $148,236.
If you are late in the savings game, don’t be discouraged. You can’t change the past, but you can start saving today. The sooner you start, the more you’ll enjoy the power of compounding interest.
- Diversify Your Investments
News flash – the stock market is not the only type of investment you should consider. There are other investment vehicles that offer varying degrees of risk and potential for profit.
For example, real estate never goes out of style. Everyone needs a place to live, which is why it may be wise to invest in either real estate or real estate investments like Fundrise. Although having a strong stock portfolio is important, investing outside of the market can be a good move as well.
- Act Your Wage
Your mother might have told you to act your age when you were goofing off in the back seat of the car. I’m going to nag you to do the same, the only difference being that you need to act your wage.
The problem with many of us is that we’d rather look like a high roller rather than actually be one. We spend more than we can afford to impress people we don’t care about, and it drives us further and further into debt. But when you act your wage, you’ll start building real wealth rather than just looking like you are.
- Create Passive Income Streams
Advances in technology have created a whole host of new money-making opportunities, so there is no reason to rely entirely on your 9-to-5 paycheck anymore. While some of these gigs are labor intensive, there are also hundreds of new passive income ideas to try.
By developing passive income streams, you allow money to flow in while you sleep. Since these activities are passive in nature, they require very little energy or time to earn it. Rather than blowing the money on new bills, use the money to start building real wealth. Depending on the type of income you’re earning, you may even be able to set it aside to pay off debt or take that bucket list trip to Italy you’ve been dreaming about.
- Become a Debt Destroyer
There is no way to sugar coat this: Debt is drowning your financial future. Every time you borrow a dollar, you are wasting money on interest charges. Additionally, you lose the chance for that money to earn compounding interest for you!
Paying off debt isn’t fancy or complicated. Just make a list of all your debts, ranking their interest rates from highest to lowest (leaving your mortgage for last). Then, stop adding to your debt list. Adjust your spending and devote the money you save toward paying off your debt, starting with the highest interest loans first. With a little focus, you’ll pay off your debt quickly and free up more funds to invest.
- Have a Solid Emergency Savings Account
No matter how careful or prepared you are, things are going to happen. You can’t prevent life’s hardships like an ER visit or a blown transmission, but you can prevent how these real-life situations affect your budget.
Having a solid emergency fund can help you weather the difficult times and keep your financial life from completely imploding when they arrive. To get started, focus on saving just $100-$200 a month until you have at least $1,000 saved. Then, treat your emergency fund like it doesn’t exist. Use it for emergencies only. Trust me, when you need it, you’ll be glad it’s there.
- Find a Budgeting Method that Works for You
Here’s the thing about personal finance: It’s personal. Different things work for different people. The same goes for budgeting. The best budget is one that you actually use. It’s also the one that helps you reach your financial goals. Play with different budgeting tools or apps until you find one that keeps you accountable and helps you stay on track.
Personally, we use a zero-based budget to plan our finances each month. We think it’s the best way to plan for each and every dollar we earn and spend. It’s so simple that we don’t use a lot of fancy apps or spreadsheets. We just grab a pen and paper and write it out. Our family has had great success just by keeping it simple.
- Change Your Mindset
The way you think about money can have a huge effect on how much of it you have. While I don’t believe you can think yourself into riches without action, I do believe in the power of positive thought. If you are constantly telling yourself that you are doomed to be stuck in debt forever and that you can’t get ahead, then you are probably right. Just like in other areas of our lives, our thoughts are strong indicators of what actions we’ll take.
It’s important to change the way you think about money and debt. Just because “everybody else” is dealing with a giant car payment, financing furniture, and accruing credit card debt doesn’t mean it’s a good idea. In fact, when it comes to money, following the crowd is often the worst idea. The majority of Americans don’t have enough money saved to handle a $500 emergency. Instead of following the crowd, say no to debt, yes to saving and investing, and make the decision to start building a financial future you’ll love.
There are no legitimate steps to getting rich quick. It’s a myth, and it’s likely distracting you from focusing on the things that can help you build real wealth.
Wealth is built gradually by investing more, spending less, and diversifying your investments and income. You can create a financially secure future. By taking simple steps today, you can help ensure your desired success happens.