Finance is something I never saw myself getting into. First of all, I never thought I’d have enough money to “build wealth” and second of all, I guess I assumed my employer would deal with it for me. Cut to being self-employed and completely immersed in the world of personal finance. And if you’re an adult nearing age 30, you should be too obsessed with your personal finances too.
First of all, let’s get one thing straight: you don’t have to be making bank to start taking control of your finances and building your wealth. I’ve always been fairly responsible with money, but if I would have started saving with this mindset years ago, there’s no doubt my net wealth would be higher. No matter how much money you make, you can achieve financial success. It’s all about being responsible and smart with what you do have. Here are the basic things I’ve learned to grow my wealth.
You’ve probably heard of the 50/30/20 rule of thumb: 20% of your income should go to savings, 50% to necessities, and 30% to discretionary items. I don’t totally agree with it. I think 30% of your income pretty much unaccounted for is kind of insane. I realize that some people might make barely enough to pay their bills, but I swear, I also see those same people posting pictures out at the club in a new dress and professionally manicured nails. Having fun is important, yes, but if you want to build your wealth and plan for the future, saving needs to be a priority. Do I want to go have drinks with the girls? Yes. But would I rather put that $50 towards savings or buying some Bitcoin? Um, hell yes. Sorry, girls!
Speaking of Bitcoin, investing should be a major part of anyone’s financial plan. I started investing in the stock market through an individual brokerage account a few years ago. I barely have to do anything and my money is growing instead of sitting in a bank account. If you want to get started investing in a simple way, I suggest Wealthfront. Wealthfront is a platform I use to track my wealth as well as invest in the stock market directly. Wealthfront offers “robo-investing” services, which is basically a computer investing for you. That might sound a little crazy, but not when you really think about it. The computer uses algorithms based on your needs and your comfortable risk level. Trades are automatic and because there’s no one to pay for their work, there are no fees for up to $10,000 of managed assets (or $15,000 if you use my link!). Pretty amazing. There are tons of studies and they all show that robo-investors are successful in growing wealth and comparable to other financial advising services (including professional financial advisors), especially for beginner investors. Even if you don’t want Wealthfront to manage your investments, you can still use it to track all of your accounts in one place and plan for your future.
Use my link to sign up with Wealthfront and get an extra $5,000 of fee-free investing!
My newest area of investing is cryptocurrency. Cryptocurrency is a digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank. The reason everyone is investing in cryptocurrency right now is because of the global connection the internet has created and uncertain political tensions, it’s safer to move away from a centralized bank, which is vulnerable to hacking and inflation, has miscellaneous fees, and is limited to one country’s laws and protections. Cryptocurrency, like Bitcoin and Ethereum, gives the owner more control of his or her money in today’s digital age. Of course, there is some volitility, as with most investments, but as long as you do your research and stay up to date on the status, cryptocurrency is a great option for investing. Personally, I use Gemini to purchase my Bitcoin, and Exodus to store it locally. Whaleclub is also a popular platform.
Use–and Pay Off–Credit Cards
Credit cards are a great way to earn points, cash, airline miles, various perks and more. This gives you flexibility to use those perks instead of your own money. My personal favorites are the Chase Sapphire Reserve for the amazing travel persk and Delta Amex since I fly Delta a lot. Some credit cards will even give you cash back so you’re saving money you wouldn’t otherwise. There are a lot of great ones out there, so be sure to do your research and compare! But the key is to pay. them. off. Personally, I pay my credit cards weekly, and I admit that may be a little psycho, but owing money weighs on me and I feel better when they’re paid off. Your credit cards should at least be paid off in full every month. If you can’t afford to pay if off in full, then you’re spending too much. I never buy anything that would make my credit card balance higher than my checking account balance. I can always, at all times, pay my credit card bill in full at all times. This is what helps me limit my spending. Well, that and I get a bunch of free stuff as a blogger. Let’s be honest here.
Monitor your Accounts
You should always know how much money you have in your accounts, how much you owe on each credit card, how much you owe in student loans, etc. I check all my accounts every day. It’s easy to get roped into recurring fees and then forget about them. Monitoring your accounts not only helps with that, but also helps with keeping your all spending under control. When it’s in your face every day, you can’t ignore it.
I also check my credit about once a month using Credit Karma to make sure everything looks right. The one exception is my Etrade account. I use that mainly for long-term investing, so I don’t monitor it daily – it would just stress me out. I use Robinhood for more short-term investing, so I check that one more often. An easy way to monitor all your accounts together is to use a service like Mint or Wealthfront. I used to use Mint before I started using Wealthfront for some of my investing. Both are free and very easy to use! They connect to your accounts through your online logins, so you have up to date reporting on all your accounts, all in one place. I used to use Mint before I started using Wealthfront for some of my investing. Both are free and very easy to use! They connect to your accounts through your online logins, so you have up to date reporting on all your accounts, all in one place.
What About Retirement?
That’s the whole point of wealth building anyway, isn’t it? It’s super important to have a retirement account, like an IRA or a 401K, but depending on your employment situation, your options may vary. I started with a Traditional IRA and I max out the yearly contribution of $5,500 each year. My next plan is to open a SEP IRA, which is for self-employed individuals and has higher limits. The incentive to most IRAs is that you are not taxed on the income you contribute, so a SEP IRA can significantly lower taxes, resulting in more money for savings. You’re taxed when you take it out, but by then your income will be much lower since you’ll be retired.
Did I mention I’m obsessed with personal finance? And this is just the tip of the iceberg. I feel like I’ve learned a lot, but I still have a ways to go!
What are your best personal finance tips or techniques?
Photo by Johnny Cheng.