"Let's talk about money," said no normal person in a conversation to their friends. In the trio alongside religion and politics, conversations about money are often looked at with skepticism.
Plain and simple, views of money are controversial. Some of us might've grown up hating money and understanding how stressful it can be. Some of us might've not had think twice about money. Whether you grew up desiring it, wishing you had
more, didn't notice it until you were an adult, or were taught that it's the "root of all evil," at the end of the day, it's what makes the world go 'round.
When I got a job during college that offered a 401(k), I had no idea what to do. All I knew about 401(k)'s were how to spell them out. Not many of my 18-year-old friends were investing in retirement (or even making it to class), so I hired a financial advisor. As I've grown older, the importance of managing, acknowledging, and growing money has become more and more prevalent.
Let's have a conversation about money. Whether you're in a place of comfort or living paycheck-by-paycheck, you probably want to be financially stable. So... I'm sharing 10 financial tips to start building wealth.
1. Change Your Mindset!
The first step in building wealth is to change your mindset about money. When you think of money, what do you think of? Desire? Greed? Annoyance? We've been taught that money is the root of all evil, however, money isn't evil, the love for money is evil. But, being responsible and building your money in a healthy way is not greed. Start thinking about money as a vehicle or tool to help you obtain your call in life. Once you switch your mentality that money is an instrument, not a shackle or an addiction, you can look at your resources differently.
2. Remember Wealth is Subjective!
Alongside changing your mindset, remember that wealth is subjective to the position of your life. To be "wealthy" is different for a single mother-of-four than it is for a recently retired CEO. Take a step back and define what you believe would be your ideal "wealth" based on your life situation.
3. Trade Luxury for Reality!
This is probably the largest tip. A lot of our money goes towards our "impression" of ourselves towards others.
I'm not telling you to drive a car that barely runs or live in a shack. I am telling you, however, that there's a difference between looking wealthy, acting wealthy, and being wealthy. Remember that wealth is not based on material items. If you have a designer bag or a foreign car, but you have $0 in your savings account, it's time to prioritize. Wealth is not based on material items.
Not only is comparison the thief of joy, but it's also the thief of your hard-earned money. You might be spending time trying to keep up with the Jones as a detriment to your financial status. Social media can help play a part in this. As "influencers" become a trend and we see beautiful vacation pictures from our neighbors, we start becoming envious and $1,200 on new clothes is gone before you know it. Learn how to savor and be content with what you have now.
4. Be Resourceful
That being said, be resourceful and go the extra mile to do your research to provide for your household. Whether that means spending more time looking at cars or waiting for that TV to go on sale, be conscientious of what you're purchasing. Remove the impulse thought of needing it now and prioritize the thoughts of needing the right price.
5. Start Saving for Retirement TODAY
That's right, TODAY. Get rid of the mindset that you'll start saving "when you're older and have more money". If you're a salaried employee and are offered benefits, ensure that not only are you contributing to your 401(k), but you're increasing the percentage of what you contribute every year. If you're self-employed, or don't know where to start, talk to a financial advisor about opening an IRA to ensure that your money is being invested for the future. Start investing.. even if you put away a couple hundred dollars a month. You'll never be mad at yourself for saving money... never! No one ever said "I wish I had started saving later". In fact, it's usually the opposite.
6. Change Small Habits
Don't get me wrong, I'm all about "treating myself".. but only up to the point where habits are detrimental to my pocket book. Did you know the average cup of coffee at Starbucks is $4. If you're like other average customers, you visit a Starbucks between 6 - 12 times a month (more depending on your caffeine addiction). Throw in a couple bagels, you spend about $45 a month on coffee and way more than that on Chick-Fil-A. Doesn't sound so bad, right? Until you look at your credit card bill and realize that all the "small habits" have added up to $2,000.
If the idea of saving money scares you, focus on changing your small habits first. Maybe only get coffee once a week. Set up a $1 transfer to savings every time you use your debit card (most banks offer this). Instead of ordering a beer at the restaurant, order a water (guess what, it's free!). Start by looking at your habits that might be counterproductive and make small shifts.
One of my beneficial small habits is the "money minute". I spend a minute a day checking my accounts to review recent transactions, balances, and upcoming payments so I'm aware of how much I have and where it's going.
7. Budget Everything. Period.
You can't make a plan with your money if you don't know where it's going. Know your numbers and make a budget! Write down how much income you're receiving a month and then decide where it needs to go. Prioritize the "musts" first (i.e. paying bills), paying off the debts second, savings third, and luxurious money last.
In my budget, I have a tab for "monthly income," "monthly expenses," and "debt to pay off". In the monthly income, I write down the amount I'll get from my salary. In the monthly expenses, I have every item listed, the amount, and when they are due. All of the monthly expenses are subtracted from my income and left with a total. From there, the total is allocated to subjects I choose (i.e. travel, savings, car washes, etc.). Each dollar I earn, I know where it goes to ensure that I'm living within my means but also putting money away.
8. 911: Always Have an Emergency Fund
Create a separate emergency fund account. Most financial planners suggest having 3-to-6 months of living expenses saved up, but if you're trying to pay off debt, have a goal for what your emergency fund should be starting off. For example, it might be more reasonable for you to start with an emergency fund of $1,000 and work up from there. This fund should only be touched in (you guessed it) case of emergency. If you lose your job, if you have a medical emergency, if your house has a leak, you'll be glad to know that you have dedicated an amount for a cushion to land on.
9. Debt - Good, Bad, and Ugly
If your money doesn't grow on trees, sometimes debt is inevitable. We try to plan for life as best as we can, but sometimes it doesn't go accordingly. Debt can be helpful or hurtful to building wealth.
Good Debt - There is certain debt that can be leveraged strategically in the long term like mortgages and student loans. Think of a mortgage as a savings account for your money, as long as the payments are within your means. To determine whether or not debt can be beneficial, ask yourself "will this debt pay me back more than what I put in?"
Bad Debt - Bad debt will do little improve your financial outcome. Credit cards definitely go in this bucket if they're not used correctly. Stop the mindset of "I'll just pay it off later". If you had the money to pay it off later, you already would have done so. Sometimes, like a car loan, bad debt can be inevitable but it's important to pay it off as quickly as possible.
Ugly Debt - Ugly debt not only slows down the rate at which you can build wealth, but it stops it completely. "I'm so far in debt, let's just put it on the credit card." or "I'll just use this loan to pay off my other loans because it has a lower interest rate." Debt can add up quickly so it's important to get ahead of situations before they reach this stage.
10. Create Goals
Finally, the biggest step in your financial health is creating goals. Once you've determined where your money is, where it's going, ask yourself where you want it to go. Some goal setting tips are:
Have Intentions for Your Goals - Instead of thinking of a monetary goal, think of what the goal is for. Instead of your goal being "I want to save $5,000 in a year" change your mindset to "I'm saving $5,000 this year in order to protect and provide for my family in the event of an emergency." Reframe your goal with an intention in mind, instead of the amount.
Set Attainable Goals - If you have an annual goal to put back money into savings, look at the attainable steps to getting there. For example, set up an automatic transfer from your direct deposited check directly to your savings account that you probably won't notice.
Save Before you Spend - Create goals for big purchases to save up for your goals before you spend. Whether it's for a new phone or a new car, make sure that you're in the financial position to purchase before you take it home.
While the topic of building wealth and being financially stable can be daunting, it's important to realize that we have a responsibility to use money as the vehicle to our destination. Building wealth doesn't happen overnight, but there are small steps you can take to get you there over time. If you're unsure of where to start, seek out a mature family member, friend, or financial advisor to help guide some of your decisions. Money doesn't buy happiness, but with the right habits it can give you some control over your life.
Proverbs 31:18 "She sees that her trading is profitable, and her lamp does not go out at night." Proverbs 31:20 "She opens her arms to the poor and extends her hands to the needy." You can be profitable AND generous.
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