One of my most loyal readers requested I write this post. And when she suggested it, the topic became a top priority. Thanks again to everyone out there for reading and sharing my posts. Having people I know in real life – along with those of you I don’t know personally – read my stuff feels amazing. I hope this list of three steps to improve your financial health helps you start the year off on the right foot!
Grow Your Income
Want to become a millionaire this year? All you have to do is earn two million dollars and save half. Sure, it’s harder than it seems, but the point still stands: if you want to grow your personal wealth, it starts with the top line – your earnings. Very few of us max out our earning potential. Let’s review a few ways you can increase your income:
Earn a Raise
If you are reading this blog, I already know you kick a$$ at work. You’re smart. You’re looking for ways to improve your life. You want to win. All these things help you to be successful in your profession. If you’re like most and have a boss, make sure the two of you document the expectations of your role. Make it known that you would like to be considered for a raise and promotion by reaching these goals. Then go blow them away.
Show your boss your worth to the company. Also, do some research and know what you’re worth on the open job market. If you’re not making close to that amount, do something about it. Suggest a number you think is fair with whomever controls your compensation. Remember, nobody wants to lose a top performer.
Help your company win. Advocate for yourself. Earn more money.
If you get paid hourly, put in some extra time to earn more. If you’re salaried, ask if you can take on more responsibility outside of your current role for some extra pay. One friend of mine works in retail. She makes extra money from her employer on the side by running the website and social media accounts. She even gets to do it from home. I know working more is not fun, but it will help your finances.
Unfortunately, there are times you can’t get paid what you’re worth at your current employer. Maybe they’ve fallen on hard times. Maybe their hands are tied when it comes to compensation by a corporate policy. Who knows why?
I’ve seen so many people (myself included) earn big pay jumps by changing companies. If you think your current gig is shortchanging you, get that resume together and find a new one. Very few people like their jobs enough to not get fairly paid.
Start a Side Hustle
Have you exhausted opportunities to improve your income from your day job? Find an opportunity to earn on the side! Chances are you have a hobby that you can turn into a side hustle.
I have another friend who’s a great singer. He spends some weekend nights playing music with his band in bars. He loves it. He’d do it for free. But he doesn’t have to because he gets paid for it. Even though he can’t make this his full-time job, getting paid to have fun is a win in my book!
That’s the dream right? Making money from something you would do for free! Do you love dogs? Figure out how to get paid to walk them or dogsit. Are you crafty? Start an Etsy business. You can do this. If you do it really well, that side business you love may even replace your income one day.
Budget & Spend Based on Priorities
Most people hate budgeting. They think it’s restrictive. THIS IS NOT TRUE. Since you set your budget, YOU choose where the money goes. It’s about prioritization not sacrifice.
Set Your Goals
Want to retire early? Want to surf in Hawaii? Want to be a stay at home parent? You set the goals first and build the budget second.
Build a Budget
You pick where you want your money to go. Start with your income and make a plan for every dollar. First decide how much you want to save to reach your goals. Then figure out the other expenses.
What if there is not enough money to go around? Rethink your planned spending in terms of priorities. If savings and vacations are the highest priority for you, maybe lower cost housing or a less expensive vehicle is in order. Did you know that owning a brand new SUV or living in a $1M home are not necessities? Really! I kid you not. You can almost always find a way to have your highest priorities met, but may not be able to have it all.
Track Your Spending
OK, so you set your goals. You built a budget. Now what? You have to track it each month. Did you budget $200 for eating out in January and then spend $1,000? You need to catch that ASAP. By budgeting only $200, eating out was not a priority for you. Did your priorities change? Then change the budget. Maybe you want to move money from the vacation fund to eating out. That’s OK. Just keep track and nail those goals. Tracking the numbers will help you stop spending in areas that are not as important to you.
When you spend on what’s most important to you, it’s called Winning Personal Finance!
Make your Money Work For You
You didn’t think I’d get through this post without talking about investing right? I’m going to keep this section as simple as possible.
Get Out Of Debt
Are you paying high interest on a credit card, auto loan or student loan debt? Any high interest debt is an emergency and needs to be eliminated. Use your budget to prioritize an elimination plan and get it done. Compound interest is a beautiful thing but only if you’re earning the interest. It’s a nasty virus if you’re the one paying.
The mix of investment types you hold is a key to achieving the returns you want. Are you sitting on cash in your 401(k) because you never picked an investment? Are you 22 years old with 50% of your money in bonds and not more heavily weighted toward stocks? You may want to rethink those choices. I don’t have nearly enough space here to opine on what proper asset allocation is for everybody. I suggest you do a quick evaluation to make sure you’re on track. A good place to start would be to compare your asset allocation to an age appropriate lifecycle fund.
Enemy number one to your portfolio is fees. Wait…actually enemy number one may be yourself. OK, enemy number two to your portfolio is investment fees. Some of these are easily seen up front. Others may be hidden. You need to know what you’re paying for your investments.
Are you paying an advisor a percentage of your assets under management? If you’re paying 1% on a $1M portfolio, that means your paying $10K per year. Make sure you’re getting your money’s worth.
Do you invest in actively managed mutual funds? Check the prospectus. They also could be charging you a big fee. You can get exposure to the total stock market by investing in VTSAX that charge a nominal 0.04% fee. If you are paying much more than that, make sure it’s for a good reason.
Congrats! You made it to the end. I really appreciate you reading, but that’s not enough. You need to take action. First copy this post into your calendar with a reminder on two separate occasions. The first should be around two weeks from now. The second should be around four weeks from now.
Then pick the topic on this list that most suits you and get to work. Improve your financial life today. In two weeks, tackle the next one. In four weeks the third. Then come back and tell us all about it. Reading about self improvement is great. Taking action is better. Take some action today!
Love this? Want to thank me? Share this post on your personal Facebook page. Your friends want to improve their financial health, too!