Are you banking on a huge inheritance for your retirement? Or maybe you’re counting on the lottery to take care of you during your golden years? If both of these options are out of the question you may need to boost your net worth the old fashioned way, by saving and increasing your income.
Your net worth is the total accumulation of everything you own minus your liabilities. The higher your net worth, the better you will feel about your financial security.
Here are some personal finance habits that can help you boost your net worth.
Change your money mindset
Do your friends constantly complain about bills and expenses? Do they spend your gatherings talking about how the market is going to crash and recommending that it may be wise to cash out your investments? If this sounds like your social circle, you could be influenced to make decisions that could be harmful to your future nest egg.
Your friends have a substantial impact on your financial well-being. If your social circle makes wise financial decisions, it may encourage you to do the same. However, the same may be true for the contrary.
One of the most important personal finance habits you can adopt is working on your money mindset. Developing positive money philosophies that promote effective money habits can ultimately help to boost your net worth.
Start by reading wealth building financial books. This instructional reading material will help you learn basic financial concepts that you can apply to your own life. Reading financial books will help you shift your money mindset to abundance, therefore encouraging you to grow and boost your net worth.
It may also be wise to socialize with financial professionals who understand the money industry. You don’t have to spend your time chatting about stocks and bonds, however, having them available to run ideas past could help you make better financial decisions.
Spend less than you earn
In today’s society, you’re bombarded with ideas of materialism. You’re encouraged to keep up with the Joneses and live a lifestyle that may be beyond your financial means. The reality is, the more you worry about keeping pace with everyone else the less time you have to focus on your own financial well-being.
The Joneses will not fund your retirement, so it’s up to you to prioritize your own financial health. Spending more than you earn is easier than you think and can lead to a life of debt and anxiety. That’s why it’s important to evaluate your budget, determine what you can afford, and make a conscious decision to live within your means.
A good rule of thumb is to adopt the 50/30/20 rule. This means that you use 50% of your budget for living expenses such as your mortgage, 30% for miscellaneous expenses such an entertainment or vacation, and 20% goes to savings. This rule acts as a great guideline for taking control of your cash and living within your means. It helps you prioritize your spending by proactively telling your money where to go.
Automate your retirement savings
With all of your responsibilities, it’s easy to forget simple financial tasks such as contributing to your retirement accounts. By automating your contributions you eliminate the thought process involved in saving for your future. You are also eliminating the temptation to use your extra cash elsewhere. If it’s taken out of your account every month automatically you no longer have the opportunity or temptation to spend it on frivolous things.
Most banks will allow you to set up automatic contributions to your savings and retirement accounts. Visit your financial institution’s website for directions on how to establish your savings automation. Additionally, if your employer offers a 401(k) program, they can automatically take funds out of your check to contribute to the plan.
Automating your retirement savings is a great personal finance habit to adopt today!
Increase your saving percentage
It’s recommended that you save at least 20% of your income toward your financial goals. Whether your goals include contributing to your retirement or saving for your dream vacation, setting 20% aside will help you accomplish your financial objectives. However, if you’re beginning to save, 20% may seem like an astronomical amount.
Instead, start by saving a smaller amount. Even if you have to start with 2%, you can slowly increase your contribution over time. By starting small and increasing your contribution percentage slowly, it may not seem so overwhelming. Becoming too overwhelmed can increase your chances of giving up, or not saving at all.
If you want to increase your chances of success, increase your saving percentage slowly.
Also, using a retirement savings calculator is a great resource to help you determine if you are on track for your ultimate retirement. Keep in mind, this is an estimating tool to help guide you. If it appears you have a shortfall, this is a great time to increase your savings.
Keep your expenses low
$13 for an Amazon Prime membership, $14 for a Netflix subscription, $73 for a gym pass; all of these expenses can add up. Keeping your expenses as low as possible can help you stay within your budget and prioritize your retirement savings. If you have no idea what your expenses include, take time to review your bank and credit card statements.
You may want to spend a few months monitoring your spending habits to determine where your money goes. You may find that you’re spending money on subscriptions and bills you didn’t even know you had. These expenses are taking money away from your retirement savings.
If you decide there are a few expenses you would like to keep, try contacting your providers to negotiate a better price. You may be surprised by the discounts you can receive by simply asking service providers to lower your bill. After all, it never hurts to ask.
If you don’t want to spend the time calling your service providers, try using apps like BILLSHARK and Trim. These apps help you cut costs by contacting your providers for you. They may take a fraction of the money they save you, but it may be worth the time if you dislike spending hours on the phone with your cable provider.
Prioritize your financial education
Not understanding the financial industry can cripple your ability to boost your net worth. Reading financial books and networking with financial professionals are only a few of the ways you can increase your financial knowledge.
One of the best ways to boost your financial confidence and literacy is to partner with a financial planner with retirement expertise. Retirement planners are experts in the finance industry and specialize in helping people understand and optimize all of the pieces of their financial puzzle, with the ultimate goal to boost their net worth and help them adopt positive personal finance habits.
Not only are financial planners great resources for boosting your financial education when faced with tough financial decisions, they can also help you see your entire financial picture and suggest options and strategies to aid you in achieving your ultimate goals.
The better you understand the financial industry, the better you will be able to manage your finances.
The bottom line
Adopting these simple personal finance habits can help you boost your net worth. If you’re just beginning your financial journey, it’s okay to slowly implement these habits over time. Taking on too much at once can leave you feeling overwhelmed. Making small changes at a time will help increase your financial confidence and commitment to achieving your goals.
If you’re looking for a financial planning partner who can help you boost your net worth, we have financial planning offices in Redmond, Seattle, Mill Creek, the Tri-cities region, and Denver. Our firm focuses on helping retirees and those preparing for retirement achieve financial freedom by creating a plan that shows them how they can have the income they need and want until they turn 100.
If you’re ready to take the first step to achieving your retirement goals, our team is ready to assist you. We’ve helped hundreds of couples and individuals smoothly transition with confidence, and we’d like to do the same for you.