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You want to level up financially? Here’s everything I know that has personally worked very well for me.
Remember there isn’t such a thing as getting rich quick. Money and assets accumulate over time.
Your spending habits + your investing habits + your earning potential = your financial future.
These three things are areas where you can improve and we’ll get into detail on each one of them. Let’s go.
YOUR SPENDING HABITS
The absolute first thing you do to take control of your spending is to create a budget. Have an expense tracker with different categories where you record all your expenses and figure out how much you spend on each category each month.
Your expense tracker should consist of two sections: fixed and variable expenses.
Fixed expenses consist of costs you spend a predictable amount of money on each month like rent, mortgage, loans, utilities, insurance, internet and cable, subscriptions, and taxes.
Variable expenses consist of money you spend differently each month like clothes, books, decor, going out, hygiene, or whatever you spend money on.
Within these areas set limits and aim to stick to them. Be disciplined enough to stick to these limits of your future self. Remember, every penny you don’t spend goes towards your investments or into your savings.
How to spend less:
Avoid money eaters as I call them. Purchases that can be avoided or reduced and hold in itself not enough value. Here’s what to do instead.
Expensive to-go coffee orders —> Learn to make them at home
Eating out or ordering in a lot —> Cook at home and meal prep & when grocery shopping have a set list of things you need
(Designer) clothes —> Invest in quality pieces and go thrifting
Online impulse purchases —> Let them rest in your cart for a night
Instore impulse purchases —> Look if the store has an online website you can purchase it later when you thought it through
Multiple subscriptions —> Have an overview of your subscriptions and their cancellation dates. Avoid multiple subscriptions for the same service like Amazon Prime and Netflix at the same time. Cut them down as much as possible and aim for group subscriptions since they are often cheaper.
Alcohol —> Personally I don’t drink a lot of alcohol but if you like to, avoid expensive alcohol or drinks in nightclubs or bars since they’re really expensive. Always pre-drink. After that, you don’t need to get completely wasted in my opinion since it’s not good for your body and your energy levels (not sound like your mom but the wellness girly in me wanted to come out :))
Additionally:
- Take time to compare prices and look for discounts. Especially for big purchases.
- Prioritize quality over quantity.
- Learn to differentiate liability from asset purchases. (The book “Rich Dad, Poor Dad” by Robert T. Kiyosaki” talks about this a lot.)
YOUR INVESTING (& SAVING) HABITS
SAVING:
A rule of thumb: have a couple of month’s expenses before investing large sums.
INVESTING:
When it comes to investing there are thousands of options and opportunities.
Here are a few common ones and some of them I invest in myself.
The Stock Market:
It’s probably the first thing that pops into your mind when someone says investing.
You can invest in individual stocks or ETFs (Exchange-traded funds).
- Individual Stocks: Personally, I invest in a select few companies and only a small portion of my portfolio is dedicated to them since they are risky and I don’t have the money to be risky. Usually, for beginners, I wouldn’t recommend them. If you have more experience with the stock market, you could spend a small amount of money to test the waters if you like.
- ETFs: ETFs (exchange-traded funds) are made up of tradable financial assets, such as stocks, bonds, or currencies which allows you to diversify your portfolio and risk by investing your money into extremely tiny amounts of a lot of stocks.
Savings Accounts:
Instead of letting all your money sit in your normal bank account, you can transfer money you don’t need to a savings account that gives you interest. One option is a CD (certificate of deposit). A CD is a specific savings account that usually has higher interest rates since you keep your money in that account for a longer time without withdrawing from that account.
Retirement:
Make sure you care about your retirement. There are different options in different countries to do this but it’s so important to be financially secure when you retire even if it means delaying instant gratification by not buying certain things and investing the saved money.
Education:
Your education is the best thing you can invest in. You can lose money but education lasts a lifetime and helps you acquire even more money. Read books, go to courses, go to uni, or advance your education in other ways but never stop learning.
Learned skills can be an investment with unlimited return. It opens up new possibilities and levels up your earnings potential.
How to avoid bad investments:
There will always be loss in investing because it can be risky but the return on investment should be much higher.
To avoid bad investments, don’t invest in things you don’t understand, use your own thoughts and educate yourself on what you’re actually investing in.
Also, don’t invest blindly into things people tell you to because they are self-claimed “experts”. Especially people on social media. Think about it, if they found a golden opportunity, why would they share it with others?
YOUR EARNING POTENTIAL
Besides your basic job or education, there are additional options to advance your earning potential.
Number one is your skill set. Learn new skills that are beneficial for your career. Possessing your unique skill set not only makes you look good to your employer but it differentiates you from people with a smaller set of skills.
Number two is to start a side hustle. There are a wide range of side hustles you can do, for example being a creator or having a side business, or signing up for an affiliate program.
You can sell your old clothes, books or DVDs as well. I’ve done this in high school and it earned me between 200 and 300 euros.
To change your financial future you can work on each of these three points. Remember that your future is in your hands and therefore you have control over almost everything. So let’s make a beautiful life for our future selves.
