You don’t have to be a millionaire or have a huge investment portfolio to get more zeros in your checking account. All you need are a couple of good spending habits and the willpower to stick with them. That is all.
What most people do wrong is that they don’t save enough money because their financial system (i.e., where they put their money) is disorganized and unstructured. So, they receive their bills scattered throughout the month, and they have subscriptions that sneak money out of their wallets, and they only save money when they have extra funds available to save at the end of each month…which almost never occurs!
The good news is, making a few minor adjustments will significantly impact how your money acts.
One of the best things to do is to pay for certain services once a year instead of every month.
If you already know you will be using a specific service for a year, then why continue to pay for it once a month? Usually, you will pay less if you pay for a service annually, and it will reduce the number of bills you have to pay on an ongoing basis. Also, you will have a much simpler financial life because the fewer transactions you have to track, the fewer things you need to keep track of in your financial system.
Various streaming services, gym memberships, insurance, and online services typically provide discounts to people who prepay for the service instead of paying monthly. While to some people it feels more affordable to pay monthly; actually, paying monthly can often cost more money over time. Changing the way you think about a subscription; think of it as an annual expense rather than a monthly one; you may begin to see the true cost of convenience.
Paying monthly is akin to paying extra because of the available flexibility – a flexibility you probably never use anyway.
Saving money doesn’t mean you have to save a lot of money quickly; rather, learning how to consistently save (even a little bit every paycheck) takes time to establish. Consistently saving just a small amount can help train your mind to think that saving is a part of your regular routine. Over time, after developing this small habit of saving, increasing the amount becomes easier, as saving will feel like a natural activity.
The real goal is not the amount you are saving, it is developing good habits that grow over time exponentiated by good habits just as compound interest does.
A second very effective way to grow your wealth is to segregate the income you earn in clearly defined buckets as the income comes into your hands.
This does not need to be complex. People have been known to use structured methods like:
- 50% for Basic Needs,
- 30% for Wants
- 20% Savings and Debt
Some people prefer simple buckets: Spend, Save, Invest.
The structure used is less important than the concept behind assigning money to specific purposes after taxes have been taken out. By doing this before you get your paycheck, you are less likely to overspend because you already know where your check will go before it is in your account. You will not have to look at your bank account to see where all the money went at the end of the month.
Clarity and control: These are key components of financial health.
Now imagine only having to worry about bills once a month.
How much more peaceful would that be?
Instead of being stressed out with paying your rent on the 1st of each month, paying your internet bill on the 10th, paying your electricity on the 19th, and then having your phone bill due all over the place throughout the month, you can call most providers and set up your billing dates on the same day of each month (for example, either the 1st or 15th of the month).
By moving the billing date for all of your service providers to the same day, your financial plan will be much easier to keep track of. You will know:
- When each bill is due
- How much you need for each bill
- When your bill is paid
You will no longer have to guess (and worry) when a bill is due. You will know exactly what to expect each month, and you will be able to make rational decisions regarding how you are using your income compared to the last month.
Less confusion equals better financial decisions.
The Hidden Financial Harm of Monthly Payments
With monthly subscriptions, businesses make it easy for you to spend more money and they know it. Although monthly payment amounts look smaller when you’re looking at the price by the month, at the end of the year, you pay more in total than you would if you pay for the entire product at once.
You’re effectively paying interest and you probably don’t even know it.
When you select the option of monthly payments over a single payment, you’re paying more overall. From a financial standpoint, this is not an efficient use of your money. Instead, try to save your money in advance and pay for the total product at once whenever you can.
Doing so will provide you with a larger accumulation of money and will reduce your total expenditures.
Many people believe that being financially successful starts with investing; however, being financially successful begins with having an organized financial structure.
Regardless of whether you want to invest in the stock market, start a business or earn a large paycheck, your financial structure must be in place first.
When your financial structure is clean, it will help you save money easily, control your spending and create a sound long-term financial plan. When you do not have a financial structure, it is very possible that you can lose your entire income within a short period of time. However, if you have an organized financial structure, you can develop a steady increase in your income no matter how much you earn.
This is why it is important to develop good financial habits as early as possible.
The Optimum Period for Changing Your Financial Situation
The beginning of the year is the perfect opportunity to start making a change in some way; therefore, the New Year is one of the best times for changing one’s finance(s), and not only when one has become very wealthy.
Many people use the New Year to make lifestyle changes with personal finance as the focus; they reflect on what has been successful for them in the previous year and what has not.
There are plenty of ways to improve your financial situation; do this by taking baby steps. Rather than creating long-term complicated financial goals, take small, realistic steps that will provide you with the ability to achieve your long-term goals.
A few examples of small steps are as follows:
- organize your spending
- make billing as easy as possible
- save money consistently
- pay your bills on time every time you can
These types of simple actions will help lay the foundation for long-term (i.e., continual) financial security.
You do not have to be a financial wizard to take control of your finances; just use a quality system and do so regularly.
Organize your income into distinct categories; consolidate your bills to one due date; and if possible, pay for annual expenses in full. By doing these three things repeatedly, your financial life will be simpler, more soothing, and more consistent.
When your financial life is predictable, it’s much easier to grow your net worth.
Create small systems. Develop simple habits. Realize great results.
