Stats don't lie, and the numbers show us that there are certainly things that wealthy people do differently than the regular average Joe. It all starts with small savings habits that if done consistently, will increase your net worth very fast.
So what do wealthy people do differently to grow their savings? Here are 10 powerful money saving tips that will make you wealthy fast. But first, make a commitment NOW to start and never stop following these millionaire saving habits.
10 Savings Tips That Will Make You A Millionaire
1 – Set financial goals and make plans to achieve them
I'd quote a top financial adviser, millionaire, or investment expert, but there are so many of them that have emphasized the importance of setting goals and making plans that I wouldn't know which to quote! Before you do anything else with your savings plan, set realistic goals and put plans into action to achieve them.
Use the SMART goal setting method. Set goals that are:
- S – Specific
- M – Measureable
- A – Achievable
- R – Relavent
- T – Time frame (a date to which you expect to achieve your goal)
If there was one thing I'd recommend you memorize in this article (hopefully all 10 tips), then it'd be to set SMART financial goals.
2 – Pay off your debt asap
Paying off debt can be the best investment return you ever make. Think about it. Most credit cards have an interest rate of 15% – 30%. Every time you pay down your debt, that's an immediate 15% – 30% return. How? Well that's 15% – 30% that you otherwise would have paid in the cost of the loan that you no longer have to pay due to paying off the debt. Make sense?
Start with paying off the smallest debts first, and work your way up to the biggest debts. There is emotional gratification one gets when they pay off and close a loan or credit card account. That gratification is worth so much more than trying to pay the highest interest rate debts first, and will help keep you motivated.
Credit Sesame is a free service and app that will give you a free report on how to improve your credit score and debt situations. They provide you with sound expert advice based on your specific financial status.
If your tight on money, I recommend considering a debt consolidation loan with Credible for at least part of all your debts. ONLY do this if your expenses are too much for you to make the payments on all your debts combined, and ONLY do this if you close out the loans, line of credits and credit cards that you consolidate.
3 – Set up automatic transfers to savings
Lets face it, how many times have you said you are going to save a certain amount of money, then decide to make an emotional purchase instead? (Guilty as charged…) Making your savings plan automatic will not only build up fast over time, but it will also teach you to spend frugally.
It's a habit that doesn't take time to practice, cause if you have it automated you no longer need to make that tough decision to save money, or buy that new flat screen TV.
What if you don't have enough money to save? I'd be willing to bet you could cut back $10 bucks per week on groceries to put toward savings, or skip a lunch with the friends a couple times per month. My advice, start small with something you won't notice much tightening in the budget. Be that $5 per week, $10 per week or $25 per week. You know your situation. But it's important that you save something NOW and REGULARLY.
Ally Bank is an online only bank that makes setting up automatic transfers to your savings easy.
4 – Invest regularly in the stock market
I know of no millionaire or wealthy person that doesn't invest regularly in the stock market. Not only do they regularly invest, but they buy and hold. What does that mean? They don't try to time the market. They invest in growth mutual funds, or exchange traded funds that fit their risk tolerance, and they let it sit for years to come.
What if you don't know how to invest? That's OK. Investing is no longer a difficult task the way it used to be. Some companies will allow you to open up an account for free, and invest with as little as $5 and no minimum opening deposit!
They give you all the tools and resources you need that will make you look like a stock market genius. With easy to understand instructions, investing is made easy even for those who have zero experience.
5 – Take advantage of cashback websites
Cash back websites are all over the place. They will pay you a percentage back of all purchases you make at thousands of large retailers like Walmart and Amazon. That's cash back on purchases you are already making (AKA Free Money).
But make sure you only work with the trusted cashback websites, that way you have the peace of mind your purchases are safe, and that you get the best cash back options.
6 – Create multiple streams of income
The majority of wealthy people have multiple streams of income. How? Well first their primary occupation of course. But not just that, they have built up over time small businesses that pay them monthly without having to do much work at all. This is called passive income.
A few examples of this are buying and renting out houses. That's a steady flow of money coming in each month from your renters, and potential appreciation of the real estate value. Another example would be building an online business that only takes a few minutes a day to manage.
Easier ways that don't take as much time or money up front, are investing in dividend paying stocks, or investing in peer to peer lending. Each are “set it and forget it” strategies that will continue to pay you additional income monthly.
7 – Invest in real estate
As mentioned above, real estate is a great form of passive income if you buy and rent out properties. But not only am I referring to investing in rental properties, but first and foremost invest in purchasing your own home.
When you rent, you make your monthly rent payment and never see that money again. When you own a home, often times its cheaper than it is to rent (depending on the location and economic conditions. Along with that, rather than never seeing your rent payment again, you are paying down your mortgage balance and gaining equity in your home.
Equity is simply the value of your home, minus the mortgage balance. If your home is worth $350,000, and you owe $250,000 on your mortgage, you then have $100,000 of equity. When you sell your home, that's a nice fat $100,000 check to you.
Buy your own home when you are financially able to, and never max out your purchasing power despite what any mortgage lender will tell you. And if possible, use a 15-year mortgage as opposed to a 30-year mortgage note. That way you pay it off quicker, and grow your equity quicker. It is also much safer in the event of an economic downturn.
8 – Use the Acorns app roundups
Acorns is an investing app that links to your bank account, debit card or credit cards. It then rounds up all your purchases to the next dollar, and invests the extra change for you. It's like a digital version of your piggy bank at home with all those coins in it that you never use.
Acorns calls these “roundups.” Acorns is a well credible modern investment app, and has a great reputation to aiding in people saving and investing more money. The best part about it is psychologically it doesn't feel any different in your budget rounding up each purchase to the next dollar.
When you invest with Acorns, you also get access to their thousands of retail partners that will deposit a percent of your purchase you make through Acorns partner links to companies like Walmart, back into your investment account. This is the same idea as those cash back websites mentioned in savings tip #5. Only this time they just invest the money into your account for you.
Open your Acorns account here for Free, and get $5 just for signing up!
9 – Use cash back credit cards responsibly
It is only advised to use this savings tip if you set up your credit card to have the balance paid in full each month. Why? Think about your credit card debt and how it got there. I'm sure you had in mind you'd “pay it off quick” when you first got it. How long ago was that exactly?
If you can responsibly use a credit card and pay it off in full each month, many companies pay you 3-5% cash back on all your purchases you make. That's more free money!
Use Credit Sesame for free to give you great approval odds with the best credit card companies for cash back. You also get tailored recommendations on how to improve your credit score and debt circumstances.
Again, use this step with caution. The idea is to take advantage of the free money, as long as it doesn tempt you to go back into debt.
10 – Take advantage of tax return loopholes
One of the biggest ways that wealthy people save money is by taking advantage of the tax loopholes. I'm not referring to wealthy people as in those that make millions each year and own their own business, thus giving them the ability to deduct nearly everything. I'm talking about the average income earner earning on average under $100,000 per year.
Yes, even these people have a lot of tax money they are paying that they don't have to if they take the time to invest in a good accountant, or use a trustworthy tax company that will ensure you get the best return.
TaxSlayer is an easy to use and free tax service that will actually maximize your tax return loopholes.
11 – Invest with a good robo adviser (Bonus tip)
A robo advisor is exactly what it sounds like. It's an investing company/app that uses modern technology to build a diversified investment portfolio for you. Before it took hiring an expensive financial advisor that often times cost more then you got in return.
With a robo adviser, you simply set up a free account, answer a few questions about your investment objectives, and they put together a diversified investment portfolio for you. The rest is automatic, and they manage it for you for as little as $1 per month!
Saving on fees that it costs to hire a financial adviser can add up big time in the long run, that's why using a well trusted robo adviser like Betterment or Acorns is a great idea.
Make a commitment…here's my challenge to you
In a perfect world we would all be able to start implementing each of these powerful saving tips that will accelerate your path to millionaire status. But realistically, that probably isn't going to happen in most cases (to start at least). Hopefully over time you can build up the habits and ability to use all 11 saving tips.
My challenge to you is to pick 3 savings tips above, and commit to making them a habit for the rest of your life. Start small and grow big, and so will your net worth if you do this!
Not sure where to start? Begin with the Acorns investing app. Its easy to use, automatic, and you even get $5 just for opening the account. You'll be glad you did!
What other saving and investing tips have you found to be crucial to growing your net worth? Post your comments below!
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Love the article! I’ve been budgeting and saving for 10 years – since my early high school years. It’s always been an odd obsession of mine. A lot of your suggestions are ones that I’ve always been taught and have found to be true. The one thing that I haven’t used that you talked about was Acorns – I’ve heard of it, but I’ve never used it before. It really sounds like a great option and I’ll have to check it out. Thanks for the tips 🙂
Glad to hear! Thanks Lizzie, best of luck!
Great tips about savings! I especially like #8 about Acorns since it is easy to set-up and you will not almost notice it. I also like #6 create multiple income streams. Some people rely on just one income stream with no back-up in case you will lose it. You are spot on that it takes commitment to pull this off and your article has inspired me to revisit my finances and work on saving more. Thanks!
Thanks, Ian! Best of luck!