America, the focus of this issue, runs on wealth. So here’s how to get yourself some. It’s the perfect opportunity to launch a new column aimed at helping non-one-percenters with financial matters. Feel free to send in questions you’d like answered to assisted@motifri.com –ed
Big financial wins in life rarely happen by accident. They often happen through very small decisions implemented over time. In reality, wealth can be built over a lifetime of small practices that feel so simple, they are often unnoticeable.
- Turn on your automatic 401(K) increases
If you are going to do one thing, do this.
Often employer retirement plans have a feature that allows you to increase contributions by a small percentage annually. Even just a 1% increase per year can have a huge impact on your future nest egg.
You most likely won’t even notice the difference, especially if the increases come with periodic annual raises in salary.
Automation can help reduce the friction of taking action. Allowing your savings to increase slowly and automatically over time will take away the pain point of remembering to do something or relying on motivation to make something happen.
- Spend Time Looking at Your Accounts
This may not seem like a big deal, but it is. Many people don’t want to look at their accounts because they are afraid of what they will see. But avoidance is not your friend in the long run.
We recommend looking at your accounts for at least 3-5 minutes each week. There’s no need to overthink this action. It’s simply a chance to spend a few minutes seeing where your money is going.
This little action can help you catch small money saving opportunities early, before they become larger, more expensive issues later.
- Track Spending – Even If for Only a few Minutes Every Month
Budgeting can seem like a daunting task for many, but you don’t need a complicated budgeting system – just a little awareness around how you are spending it – to make a big difference over time.
Whether you use an app or have a simple categorization practice for tracking your spending, allowing yourself time for a quick monthly review can help bring spending habits into focus.
Just acknowledging the categories of where your money tends to go is important. Noticing if your dollars are going to travel, eating out, housing, entertainment, etc. can help give you awareness.
With awareness you can make adjustments. Once you really notice where your money goes every month, you can begin to slowly make changes.
- Turn on Round-Up Savings
Many banks now offer round-up savings plans. Spend $4.50 on a coffee and round up the other 50 cents to your savings account.
It seems like a small action, but if you average 30 transactions a week and save .50 cents each time, that’s almost $800 per year in savings.
This also allows you the opportunity to start seeing yourself as a saver. The words we use to describe ourselves, like “I’m a saver,” can have a positive impact on how we begin to act.
- Cancel One Subscription Each Quarter
Subscriptions can be budget killers. Digital memberships, apps and streaming services we thought we once needed were turned on and never shut off. Even if you canceled just one $20 per month membership, you’d be saving $240 per year.
Some conservative estimates show most American have on average 8-12 subscriptions. If you could find just a few that don’t serve you anymore, you could save several hundred dollars each year.
- Save Half of Every Windfall
If you get a tax refund, bonus or get a cash gift, think about saving some of that. Because you were not relying on that money to pay bills, you really won’t be missing it. Committing to saving some of every windfall will accelerate your savings without affecting your daily life.
- Increasing Savings as Your Income Increases
As your pay increases, think about raising your monthly savings amount before increasing your spending habits.
If you get a 4% raise, consider saving 2% and enjoy the rest. This simple move can at least help you pay for the rising cost of living.
The key to all this is to think small. The small things you can put in place today can make a huge impact on your wealth tomorrow. Your future self will thank you!
Matt Stone is a Certified Retirement Planning Specialist at GatherWealth in Providence.