I received a sobering comment the other day…
“Joel, thanks for the nice stories and happy emails but please give us some content that’s actually worthwhile in terms of making and saving money.”
Ooops … I guess I’ve been a little sidetracked with random stories on the blog. I figured that most regular Budgets readers already know the basic “how to” stuff. But now that I think about it, maybe getting back to money basics is necessary sometimes.
So, here’s a quick-and-dirty brain dump of money advice all in one post. This is the stuff I wish I had been told when I was younger. (Actually, maybe I *was* told this stuff when I was younger – I just was too dumb to listen at the time. 🤷♂️)
It’s split into three sections: making money, saving money, and investing money.
How to Make More Money
If you’re looking to increase your income, do some (or try all) of these things — presented in no particular order:
- Start a side hustle. Here are 80+ side hustles listed in detail. Most require no money to start and little experience.
- Ask for a raise. Careful here — you mostly deserve a raise if you are doing more work or providing more value than what you originally signed up for. If you’re giving your employer excess value, you are worth more. Create a win/win scenario. (Listen to these 2 ChooseFI podcast episodes: Ep.221 How to negotiate salary and Ep.147 Negotiating salary with Tori Dunlap
- Change jobs or careers. If your current workplace doesn’t value you, another one might. NOW is a great time to explore opportunities! It’s never too late to change career paths and find a more lucrative industry.
- Sell stuff around your house. OfferUp, Craigslist and Facebook Marketplace are good places to start. You can also find free stuff on these same apps and resell them for a 100% profit.
- Rent out your stuff. People pay for the most random things to rent. List your unused equipment/space/car/stuff online to see who wants it. Here’s a list of about 40 websites to list and rent out stuff for quick cash.
- Sign up for bank and credit card promotions. Finance companies will PAY YOU to try their services and meet certain transaction criteria. Some of these transactions you are doing anyway, so you may as well get paid for it. Personally I make about $2k per year from bank account churning. If you can handle credit and have excellent attention to detail, try credit card churning.
- Start a business. My friend Alan Donegan co-founded the Rebel Business School. This is a FREE resource with on-demand videos, blogs and podcasts full of practical information to help get your business idea up and running.
- Create art for the world. Build, draw, type, sing, photograph, cook, repair, perform, teach, or do whatever you can dream up. Chances are you have a talent that many others don’t have. Figure out what it is, pursue it with passion, and monetize it.
To build financial independence, your income MUST be higher than your spending. The more you earn, the faster you can achieve independence.
How to Save More Money
Saving money sometimes feels easier than increasing your income. But be careful not to reduce your expenses to the point where you’re not enjoying life!
Again, in no particular order, these things will reduce your cost of living:
- Aggressively pay down consumer debts. Having high interest loans is like running up an escalator that is cycling downwards. You need to crush high interest debt ASAP, as it’s one of the biggest prohibitors in wealth-building.
- Get rid of unused vehicles. Cars/motorbikes/boats are silent money thieves. Even when they’re not in use, they erode your savings. I’m not saying to never drive or own a car… Just saying that it’s most people’s No. 1 money pit, so it’s worthwhile evaluating your vehicle situation.
- Track your spending and challenge EVERYTHING. For everything you buy, ask yourself these 2 questions: a) Do I really need this? b) If yes, where can I buy it cheaper? (J. Money did this for years and wrote several posts about the money he saved. It’s all here on this page [Challenge Everything] as well as hundreds of reader comments and helpful examples. Tiny savings across many categories can add up to huge amounts.)
- Use coupons, promotions, and bundled discounts where available. Most grocery stores have a mobile app that has digital coupons. Every time I go to Vons, I use the $5 OFF coupon, which gives me instant savings for 10 seconds of work.
- Do chores yourself. Cut your own hair. Clean your own house. Wash your own clothes. If you have the skills and time to do something yourself, do it yourself and save the cash.
- Learn to cook. Restaurants charge an average of ~300% markup for prepared food compared with the cost of ingredients. You can save money by purchasing groceries and cooking meals yourself. This includes packing your own lunches for work. It’s easier than you think, not to mention healthier.
- Rent instead of buy. Remember those websites to rent your stuff out online? Well you can use them to rent other people’s things occasionally instead of buying stuff. Instead of buying a $400 snowboard that you only use twice, rent one for $30 each time you go.
- Move homes. If you have a lengthy commute to your workplace, consider moving closer to where you work and reducing transport costs. If you work remotely full-time, you could move to a lower cost of living area without harming your job status.
- Learn to negotiate. One of the most valuable skills in saving money is negotiation. Sometimes even just asking the awkward question “Do you have any discounts available?” opens negotiations you wouldn’t have known about otherwise.
- Travel like a local. Vacationing in your own city/state can be just as fun as luxurious destinations. But if you do decide to travel to faraway places, try to spend money like a local person would. Eat where locals eat, use public transportation, avoid tourist traps, etc.
Reducing your cost of living not only increases your savings rate and shortens your FI timeline, it also lowers the amount of money you actually need to save for retirement.
OK… so you’re maximizing your income and reducing your costs… Now what do you do with the money you are saving?
How to Invest Your Money
Investing isn’t optional. It is necessary.
Your money will compound over time and ideally transform your retirement nest egg into a passive income stream.
Everyone invests differently because of their knowledge, experience, and opportunities. I’ll focus on the simplest and most proven investing methods most people can use to fast-track financial independence.
- First, increase your knowledge. Learn about investing for beginners and the FIRE movement. Read these 3 books: The Simple Path To Wealth, The Little Book of Common Sense Investing, and Your Money or Your Life. Listen to every episode of these FIRE podcasts: BiggerPockets MONEY, ChooseFI, Mad FIentist and Afford Anything. (Yes, it might take a few years to get through all this information … That’s OK — learning takes time, and nobody is born an expert.)
- Max out your 401(k). Or any employer-sponsored retirement programs you have available to you. If you are a contractor or business owner, consider opening a Solo 401k. It’s OK if you can’t contribute the maximum, just add as much as you can each year.
- Open a Roth IRA. Add as much money as you can each year. If you’re not eligible for a Roth, open a regular IRA.
- Open an HSA. If you have a high-deductible health plan, you’re eligible for an HSA account. Try to max it out each year. This is the most tax-efficient investment vehicle available to Americans.
- Invest everything in broad, low-cost index funds. Inside each retirement account, choose highly diversified funds that have low management fees. The FIRE crowd’s favorite is VTI or VTSAX.
- Open an after-tax brokerage account. After contributing the maximum to your pre-tax retirement accounts, put any excess money in a regular brokerage account.
- Automate contributions. Set all of your contributions to automatically transfer and invest so you don’t have to worry about it every month. Out of sight, out of mind.
- Dollar-cost average. Don’t try to time the market or “beat” the average. Even the smartest investors in the world can’t do this consistently. Don’t worry about how much stocks are going up or down each month, just keep investing on a regular basis regardless.
- Limit your cash on hand. Apart from a small emergency fund, make sure all of your money is working for you, all of the time. (You could even opt to invest your emergency fund, like me 😉.) The more cash you hoard, the more you lose value to inflation each year.
- Invest in real estate, if you must. There are a TON of opportunities investing in real estate. My only recommendation here is to learn and network as much as you can before jumping into anything you’re unfamiliar with. Listen to every episode of the BiggerPockets Podcast and attend local meet-ups to network with successful investors. Avoid advice from people who don’t have a proven track record.
- Lastly, don’t gamble, break the law, or cheat anyone. The long-term costs of being a fraud outweigh any short-term benefits. It’s never worth it.
So there you have it … my brain dump of advice for making, saving and investing money. You don’t have to do ALL of these to grow your wealth, doing just a handful is usually enough to ensure a comfortable retirement.
My guess is that most of y’all knew this stuff already. But it never hurts reading again.
What is this list missing? (Yeah yeah I know I didn’t mention cryptocurrency…)
Have a great day ahead! 🤑💰💲💵
PS. *Attention anyone living in Los Angeles** FIRE legends Katie and Alan Donegan are visiting LA and hosting a free 90 minute lunch ‘n’ learn finance course! November 15th at 11am at Pasadena Comedy → Register here!