10 Good Money Habits to Make Your Friends Jealous
There are better reasons to save money than wanting to make your friends turn green with jealousy. But as motivating factors go, this one ain't half bad.
We love our friends. After all, if we didn’t love them, they’d be our enemies. But that doesn’t mean that we can’t also love making them a little bit jealous of the fabulous life we’re leading. This is probably why someone invented the term “frenemies.”
Then again, there are tons of folks out there who would enjoy making their friends (or frenemies) jealous but are unfortunately stuck on the other side of that fence. You know, the one where the grass is definitely not greener.
That’s why we’re here. Forget trying to keep up with the Joneses; just follow these 10 pieces of financial advice and everyone else will be trying to keep up with you.
1. Pay yourself first.
Raise your hand if this is your approach to saving money: You take care of all your bills and living expenses and then you sock away anything you have left over. Are you raising your hand? We can’t see you, obviously, but we’re going to assume that you are.
Paying yourself first means turning this whole arrangement on its head. Instead of saving what’s left over, put money into savings first and then spend the rest. You probably think that’s nuts, that your budget is much too tight to prioritize saving money.
And you know what? We get it. But if you give this method a try, we think you’ll be surprised how flexible your budget can be. When you focus on paying yourself first, the rest of your budget will pretty much fall into place.
While your friends are scrambling to save up money for a vacation or to put away for a rainy day, you’ll be sitting on a sizeable nest egg. Try it!
2. Automate your saving.
Starting a new savings practice can be like starting a new exercise routine: The hardest part is instilling the disciple to just go out and do the dang thing. But what if you could outsource that part of your exercise routine, like a fitness tracker that would actually get you out of bed and to the gym at 6 am every day? Wouldn’t that be so much easier?
Well with saving money, this is something you can actually do! Let the robots be disciplined on your behalf through automatic deductions and transfers. As soon as your paycheck hits your account, money will be moved over to your savings account. Out of sight, out of mind. Your friends will wonder how you do it.
3. Set big goals.
Practicing good financial habits is rewarding, but it can also be pretty tedious at times. But you can both alleviate some of that tedium and achieve even bigger things by setting big, ambitious goals.
You want to build up $1,000 in savings? Great. But what about $10,000 in savings? Working towards a bigger goal will help you focus your mind, step up your efforts, and get creative with your money. The bigger your goals, the more you’ll do to achieve them.
Of course, there’s a flipside to this. Don’t set goals that are so ambitious that you have no hope of achieving them. Dream big, but dream realistically.
Saving is hard enough, and it’s much harder when you don’t know what you’re saving for. Whether it’s an emergency fund, your retirement, your kid’s education, a big vacation, or a new car, these goals will help you stay on track.
Oh, and speaking of emergency funds…
4. Start an emergency fund.
What’s an emergency fund? It’s really just another word for savings, but it’s money that’s being saved with a specific purpose in mind. Unlike money that you put into retirement accounts—which you aren’t planning on touching until decades from now—or money that you’re putting towards a major new purchase, your emergency fund is for, well, emergencies.
With your emergency fund, you’re not worried about that money earning interest or being locked away where you can’t touch it. Being able to access those funds in a time of crisis is the whole idea! You might even want to maintain your emergency fund in cash.
So what’s the best amount to keep in your emergency fund? Well, we recommend that you start with $1,000. But after that, you shouldn’t rest on your laurels. The ideal amount to have in your emergency fund is enough to cover six whole months worth of living expenses.
That may sound like a lot, but it could be a literal lifesaver. It’s hard to watch someone who loses a job or suffers an injury and has their finances spiral out of control. With a well-stocked emergency fund, you’ll be prepared for the worst.
5. Eliminate your debt.
The odds are good that both you and your friends have more debt than you want to admit. Whether it’s credit card debt, student debt, or mortgage debt, all that money you’re putting towards interest every month is money that could be much better spent working for you.
So if you really want to make your friends jealous, make paying down debt your number one priority. Start with consumer debt (also known as “bad” debt), like credit cards and personal loans. These usually come with much higher interest rates, and they make zero contributions to your total net worth.
In order to get out of debt, you’ll need a plan of action. We recommend either the Debt Snowball or the Debt Avalanche. In short, these methods involve putting all your extra debt repayment funds towards one debt at a time. And when you pay off that first debt, you then roll over its minimum payment towards the next debt down the line.
Here’s the difference: With the Debt Snowball, you pay off your smallest debt first; with the Debt Avalanche, you pay off your debt with the highest interest rate.
Debt can be a massive burden, tying you down to a job or a city that you would rather get out of—you just can’t afford to. Escaping from under that burden will give you the freedom to do things you always dreamed of. If that won’t make your friends jealous, we don’t know what will.
6. Live below your means.
This one might seem a little bit obvious, but there’s still a good chance that you’re not doing it. If you want to save more money, than living below your means is a must. If every dollar you make each month is only going towards bills and other living expenses, then you’re never getting ahead. When it comes to money, you’re only ever treading water.
Basically, living below your means involves living as though you make less money than you do. If your total post-tax income every month is $4,000 for example, then rearrange your lifestyle so that you’re only spending a total of $3,000 on everything.
That extra $1,000 can then be put towards your emergency fund, your retirement accounts, or any big purchase you’re saving up for. Living like you make less money now means that you’ll have more money to live on down the line. While your friends are treading water, you’ll be roaring by them on a custom jet ski.
7. Check your credit report.
Keeping an eye on your credit score is always a good idea, but this means going one step further. By regularly checking your credit reports, you’ll understand all the areas where you need to improve your credit and you’ll be able to keep an eye out for identity theft.
Your credit reports are documents that track your past seven years as a borrower and credit consumer. (Some information, like bankruptcies, stays on your report for a bit longer.) You actually have three credit reports, each compiled from the three major credit bureaus: Experian, TransUnion, and Equifax.
By law, each of the credit bureaus is required to provide you with one free copy of your report annually upon request. If you order one report every four months, you will be able to pretty consistently track your credit history—all without paying a dime!
Credit reports can also contain errors, which might be artificially deflating your score. To request a free copy of your credit report, just visit AnnualCreditReport.com. If you need to dispute an error on your report, you can follow the instructions in our blog post, How Do You Contest Errors On Your Credit Report?
8. Get a side hustle.
Saving more money isn’t just a matter of cutting down on your expenses. You can also boost your savings by earning extra income! You could do that by getting a better paying job or asking your boss for a promotion (and a raise), but picking up a side hustle is probably faster.
There are tons of ways you can go about this. For instance, you could start driving for a rideshare service or work for any other number of “Uber but for X” companies. You could also pick up a second job or start your own entrepreneurial venture.
Whatever you do, just make sure that you aren’t burning yourself out or letting all that extra income turn into extra spending. Oh, and really do that math on your expenses to make sure that the money you’re earning is worth the extra stress.
While a second job might not make your friends jealous in the short-term, all the great things you’ll be able to do later on with that extra money sure will.
9. Steer clear of payday loans.
This is another great reason to build up an emergency fund. When you have an unexpected bill or a financial gap that needs to be plugged, turning to payday loans is probably the last thing you should be doing. With their high interest rates and lump-sum repayments, they might just make your bad financial situation even worse.
The same holds true for other types of short-term no credit check loans, which can come with APR’s upwards of 300 and 400%. Plus, you’ll have to pay the loan back all at once, which can create yet another shortfall. This is how people end taking out loan after loan after loan and becoming trapped in a predatory cycle of debt.
When life knocks you on your butt, building up your savings means having a financial cushion to soften the landing. And while you could always turn to a longer-term bad credit loan (like an installment loan) to bridge your financial gaps, the best solution here means skipping loans altogether.
10. Responsibly maximize your credit card rewards.
If you want to travel more or be able to splurge on holiday spending, then credit card rewards are a great way to make that financially feasible. You’ll need a good credit score to do so, but racking up points and miles can help you live a little bit larger than you otherwise would.
Here’s the thing: Credit card rewards can be great, but you absolutely cannot let them encourage you into overspending. Having to pay interest on excess credit card debt will pretty much wipe out all the good that rewards points can do. It’ll actually make them … pointless.
To get the most from your rewards, consider consolidating all your credit card transactions onto one or two cards. And if you really want to be responsible, you should look into transferring all cash-back rewards directly to your retirement accounts. It’ll be less fun, but your future self will thank you for thinking ahead.
In the meantime, making your friends jealous probably isn’t the best reason to get your financial house in order, but if it works for you, then we wish you the best of luck.
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