Very few decisions during your time on this earth actually change the trajectory of your life.
After a party in 2007, I scanned the huge Evite email list to try to find a woman I met there. Then I ‘stalked’ her on Facebook and asked her out.
We have three kids together now.
Though truly momentous crossroads are rare, we can make decisions every day that can change the course of our lives for the better in small increments. This is true in relationships, our careers, and especially money.
OK, so maybe “life-altering” is a little sensationalized if you’re looking for a quick fix to your problems. But starting to make these ten money moves today will help you step off the treadmill and build a foundation on which you can improve your finances and begin to grow wealth.
10 Life-Altering Money Moves
1. Change your money mindset
Most people exchange their time to earn a salary, then spend the earnings on things. You can earn a lot and buy a lot of cool stuff this way, but you’ll have trouble achieving financial freedom.
Instead, you should aim to forego nice things and use the money to invest in assets that earn more money. Invest in real estate. Buy stocks. Use the money to start a side business. Build assets that grow your wealth automatically without working. We call this passive income.
When you change your mentality from worker to investor, you’ll stop treading water and understand how to become rich. A famous money book called Rich Dad Poor Dad by Robert Kiyosaki is considered by many to be the bible on this topic.
2. Own real assets
Real estate is one of the best assets because it generates cash flow and appreciates over time. Instead of blowing your whole paycheck on nice dinners or collectible crap, save it up and by income-producing real estate.
A rental property is a good place to start. But if you want to start building a real estate portfolio sooner, a few new platforms allow you to buy real estate utilizing modern technology. You get the benefit of income and growth without the headaches of landlording or a mortgage.
My favorite real estate platform for beginner to intermediate investors is Fundrise. Fundrise allows ordinary investors to invest in high-quality real estate and earn reliable yields of 8%-11%. The innovative platform unlocks investments such as apartment complexes and commercial properties for ordinary investors. Read my Fundrise review here. Just $500 minimum investment.
For the more experienced, RealtyShares offers access to commercial real estate equity deals with bigger returns for larger investments. Read my complete RealtyShares review here. Accredited investors only. Learn more here. $5,000 minimum investment.
3. Invest before you spend
My high school economics teacher used to tell the class that at some point in our lives, we’d have the luxury of ending each month with more money than we need. Use that money, he said, to invest and build wealth.
Well, I disagree with him today. I believe in investing first, then spending what’s left over.
A 401(k) plan is the easiest and most tax-efficient way to get started investing if your employer has one. But you gotta get the investments right.
I just came across a service called Blooom that’ll give you a free second opinion on your 401(k) strategy. I tried the free 401(k) analysis and was surprised by the results (see my actual results here).
Start investing in tax-advantaged accounts before opening a taxable account. Use the 401(k) and traditional IRA to lower your taxable income. Then utilize the Roth IRA and spousal IRA to save even more. Once you’ve maxed out your tax-advantaged opportunities, you have a number of options to invest in taxable accounts.
Any online brokerage account will allow you to invest in stocks and ETFs. I recommend beginner investors start with a broad stock market index ETF like the Vanguard Total Market Index (symbol VTI). For beginner investors, check out the brokerage M1 Finance for IRAs and taxable accounts which is becoming popular with millennials for its simplified and smarter approach to investing.
4. Refinance debt
Even if you hate debt and plan to pay off your credit cards and car as quickly as possible, you may still be able to create breathing room in your budget by lowering your debt payments through refinancing. Lowering monthly payments will free cash flow and empower you to attack the debt that you now hate.
Refinancing debt has saved my family 10’s of thousands of dollars over the past decade. We refinanced our home mortgage and investment property five times between the two. We used LendingTree to find the best rates last time.
Mortgage debt is the most powerful to refinance because the numbers are usually so big. Resetting the mortgage term with a decrease in mortgage rate and/or balance lowers the monthly payment. If you can save a few hundred dollars after the cost of refinancing and you intend to stay in your home for a while, it’s usually worth it.
Mortgages aren’t the only debt you can refinance. Student loan and personal debt can be overwhelming, especially if your rates aren’t competitive. If you don’t have the cash flow to pay your debts off quickly, consider refinancing to lower your payments and increase cash flow. Use the difference to pay off your high-interest debts.
SoFi and LendKey are two top sites for refinancing student loan debt. To consolidate consumer debt to a lower rate, look at SoFi and LendingClub for a personal loan. These offer competitive rates for borrows and can save you a bundle.
5. Eliminate car payments from your life
Car payments weigh you down. If you think they’re a fact of life, you’re wrong. They aren’t necessary, and they’re killing your cash flow.
I experienced the crippling effect of a car payment I when bought a new minivan for our growing family. I never regretted buying the vehicle since I prefer new cars. But I regret saddling myself with a $563 monthly car payment. Combined with new preschool tuition and living on one income, the payment made me feel poor. Until I decided to change shit up.
Once I decided to eliminate car payments from my life and vowed to never borrow money for a car again, I was liberated. Now our family has two reliable, long-term vehicles that are completely paid for. That $563 is invested every month into assets that make us wealthier.
Buy a less expensive car and pay cash for it. Or dedicate yourself to pay off your car loan and never go back to borrowing. To get extreme, sell your car and ride your bike or take public transportation.
6. Invest in Yourself
Few investments have a higher return than education. Adults with a college degree earn more than a million dollars over a lifetime compared to a high school graduate.
But college isn’t the only option. You can invest in your self in many ways. Read a book. Take a course on Udemy that helps you achieve your goals. Or read all the free money articles on the internet that teach you how to win at money.
Investing in yourself isn’t about treating yourself. It’s about giving yourself the tools you need to succeed.
7. Change your consumer mindset
When you buy a material object, it becomes a lifelong burden. Meaning, for as long as you own it, you need to store it, maintain it, clean it, and organize it. That’s an odd way to look at things but consider this.
Before you buy an object that will clutter your home, think six months ahead. Will you be glad you bought it, or wish you still had the money? Is the item worth the time you spent earning the money to buy it?
One of the difficult challenges of earning more money is learning how to keep it and make it grow. You don’t deserve fancy things once you start earning more than is required for your living expenses. What you do deserve is a future that isn’t bound to your full-time career. Instead of consuming more, spend less and invest the difference in assets that grow your wealth. I call this the Triforce of Wealth.
Read more: Your Money or Your Life by Vicki Robin and Joe Dominguez.
8. Get angry at consumer debt
Debt has this sneaky way of taking control of our financial lives. If you’ve succumbed to too much debt, at some point you’ll need to get angry to get out of debt. Otherwise, you’ll be attached to a ball a chain forever.
At some point, you’ll have that epiphany that makes you say, “I hate these debts and I’m going to do something about it”. The results of your anger won’t happen overnight, but your decision to not live weighed down by debt anymore will change your life for the better.
9. Ditch cable
I ditched cable TV more than three years ago. In the first year, we saved about $50 per month by dropping cable TV channels and only paying for internet. However, the bigger savings is my time which is more valuable.
Instead of recording HGTV shows and watching those every night, I work on my side businesses. Working on a side hustle is more fun than watching TV, and I earn money. We still have a TV antennaand Netflix, so we’re not completely shut off from the broadcasting world. And there are alternative services such as Sling TV if we want more programming. But we don’t as we’re perfectly happy without cable (and can still access Game of Thrones).
Ditching cable is a sacrifice if you’ve always had it. It’s especially difficult for sports fans. But it’s worth it for the cost savings and the increase in the amount of time you have for other pursuits.
I saved this one for last because it’s the least likely any of us will get started on today. However, moving may be the highest impact money move you can make if you’re living in a high-cost area. Moving for the sole reason of cheaper housing or to achieve financial independence is not an easy decision if you’re settled with a family. But by the numbers it makes sense.
This idea is a constant struggle for our family because housing is very expensive for us in the Washington D.C. area. We could move somewhere with a lower cost of living, then pay cash for a bigger, newer, and less expensive house. And we’d essentially reach financial independence right then and there.
Our house payment would plummet, lowering our overall costs and skyrocketing our cash flow, assuming I could keep my job. By the numbers, it’s a no-brainer. It would certainly be life-altering.
However, we like where we live, so we aren’t looking for a life-altering physical move at this point. Though that could change one day.
Photo credit: Matt Artz via Unsplash