So you know how everyone just looks for “100 more ways to save money frugally” … or, “Be frugal and make your own toothpaste and soap to save a buck” … “The only way to save money is to be extremely frugal and sell your kids” … Just kidding, but not about the being frugal part. Those little frugal tips have nothing to do with how to become rich.
You know what sucks? Doing all those “money-saving frugal tips” and you’re still in the same place. You’re still broke, you just have a lot less time since you wasted a whole weekend making a gallon of homemade laundry detergent. Don’t get me wrong – I love natural products but did you know you can just BUY natural products already? You just wasted a ton of time, and you saved $2. You could maybe go buy some ice cream with that.
After doing all these little frugal tasks, constantly worrying about saving every little penny, you give up. Have you noticed that most of the people who are religiously frugal don’t actually gain a better financial life? They may have a $100 more dollars saved up in a year, but they’re still hating the fact that they have no money and are constantly looking for “New and Improved” ways to be frugal.
To be clear: if you’re not able to pay your bills then saving every single penny does help. You can be frugal, but you definitely don’t need to be forever. There’s a difference in being “extremely frugal” and just simply monitoring your spending.
Now you’re totally frustrated because you’ve wasted so much time on Pinterest and Facebook trying to find new ways to save a couple bucks and you just want to know how to actually IMPROVE your financial life. No more B.S. No more making your own laundry detergent (seriously, if you want natural soap just go buy it). You don’t want to stress about your financial future anymore. You’d love the comfort of knowing you have a hefty retirement and your kids are all taken care of. You want to be able to eat at that fancy new restaurant on date night and not feel totally guilty about spending that much money.
I’m going to tell you the exact things that will help you achieve those financial goals you have – like buying your first home. And what actually works when it comes to making people rich (I think I’ve established this, but just to be sure – It’s NOT being frugal)
1 – Stop putting it off and invest your money
Personally, my favorite investment is a Roth IRA. Anyone who does not take advantage of a Roth IRA is dumb because they’re missing out on so much potential money. A Roth IRA is literally just a savings account with high interest. This article has some awesome points about Roth IRAs if you want some more detail, or you can read the basics here. The main things you need to know are:
- As long as you make less than 196,000 (for married couples filing jointly) or, 133,000 (for single filers) a year than you are fine to contribute to a Roth IRA.
- You can take the money out at any time (so before you’re 59 1/2 or older) – except for the money you make on the interest. There is a wait time, a minimum of 5 years before you can take the invested money out and it can only be if you’ve turned 59 1/2, have become disabled, have passed away and is taken from beneficiary/estate, or you are buying your first home.
- You can put up to $5,500 a year in a Roth IRA.
Yes, I know. There are other places you can invest your money, like the stock market. But seriously, who actually makes money from the stock market? Just kidding. But not really … If you totally know what you’re doing then you might get away with making some dough from it. If you have no idea what you’re doing, I’d suggest finding an easier, less-stressful way to invest your money.
Like in real estate. I understand that not everyone can go and purchase an extra home. But if you can, it might not be a bad investment. Having the opportunity to capitalize on real estate investments could be for you if you don’t mind putting in a little bit of work. (I still think the Roth IRA sounds MUCH easier!)
2 – Make smarter money moves
If you’re reading this then obviously you’ve made some questionable decisions about your money. It’s time to step up and stop being dumb when it comes to your money. You need to have a financial plan (trust me, it is so not as scary as it sounds), pay off your debt – and stay out of debt – create an emergency fund and of course have a hefty retirement. This is where your Roth IRA comes in. Some of the things that are keeping you in the soul-sucking black hole of debt are:
- Brand new cars – trust me you don’t need the newest model. Millionaires did not become millionaires by buying brand new cars. They became millionaires by buying used cars that they paid for in cash, then later bought a new car with all the cash they had saved up. You’re not tricking your neighbor (we all know how broke you are.)
- High mortgage you can’t pay for. Everyone tells me this is unavoidable – but it isn’t. You’re the one who chose to buy the max amount you approved for, in the nicest neighborhood that you don’t really fit in to. DO NOT purchase your home for the max amount you can. There’s a reason that’s your max, because going a little bit over would be the tip of the iceberg for you financially. What happens if you have a sudden added expense with that hefty mortgage payment? You’re screwed. (unless you have an emergency fund … yay for you for being prepared!)
- Telling yourself “I don’t need an emergency fund, nothing is ever going to happen that I can’t just put on the credit card.” So if you lose your job, you can just put a mortgage payment, car payment, groceries and utility on your credit card? That’s some good credit you must have to be so confident that you can go in EVEN MORE debt when an emergency happens and pay it all off. (this is not a smart money move.) If you’re not prepared, something will happen to where you wish you would have listened to me. It’s this thing called life – it catches up to you if you ignore those little things you know you shouldn’t. Even just having $5,000 in an emergency fund can save you from those annoying life things that happen.
- Getting in credit card debt. Really? You know when you swipe that card, you still have to pay for it with your own money. Have you even checked your financial planner to see if you had enough money to cover all your purchases? Might want to look into it before you realize you can’t keep up with the debt you’re getting yourself in to. Just don’t go into debt – there’s no need (unless you buy a home, that is NOT maxed out at your approval level.) I’m going to tell you a little secret … I don’t even use a credit card. And I still have enough money every month after my expenses to put money into savings. Trust me, it can be done!
3 – Diversify your income
Seriously. This doesn’t always mean working harder. You need to learn how to work smarter. I know people who work their lives away with nothing to show for it. Don’t let that be you, make your money count and have extra money coming in so you can do all the things you want in life. (Like taking that family vaca to Bora Bora.)
Yes, paying off your debt will help – but if you have some big dreams then you need to have a big paycheck every month to supply that. There’s no reason why you can’t build multiple income streams – or make more with the one you have now. Sometimes that means switching to a job with more income to do the things you want.
Diversifying your income can be as simple as creating a blog (affiliate – because this is the exact ebook and course that helped me start my blog) and helping people with something you’re awesome at. (Trust me, I know you can find something you’re a lot better at than others!) If you’re crafty I envy you but I totally think you should start selling your stuff. Maybe you just want some extra income coming in online.
Or, you can go to bigger things like investing in real estate or the stock market … (that’s a maybe on the stock market)
The point is – you can’t wait for life to you throw you a dream job, dream home and money to throw on the street. The people who go out there and do something to change their current situation, typically end up in a much better place than they were before.
4 – Stop focusing on how to become rich and find out WHY you want to be rich
I’m not ashamed to say that I want a lot of money. I want a nice house, to take my family on vacation all the time and to indulge in the things I love. You know what else? I have this major desire to help people. I am constantly thinking of new things I can do with our money to help those that are less fortunate. This is why I want to be rich.
Why do you want to become rich? Do you want to retire early? Do you want to finally get that dream home? Maybe you want to pay for your kids college and take your entire family on a cruise every year. Having something specific that you are working towards will make it even easier to make those smarter money decisions. When having a financial plan you’ll realize you’re closer than you thought to achieving those goals you have.
You may want to stay in the “extremely frugal” group and pretend that that is really fixing the problem. But, it’s not. Face your fears (and your dumb money problems) and actually do something about it. The sooner you do, the happier you will be. No one has ever regretted changing their money habits, getting out of debt, having an emergency fund and going on a family trip to Bora Bora. Pretty positive you won’t regret that either.
Remember, just buy the soap. Don’t waste time making it just to save a penny. Use that time to figure out you can do to actually make you rich.