The legendary American showman P.T. Barnum once said, “Money is a terrible master but an excellent servant.” And the more it can serve us, the better.
However, many of us accept our salaries, spending, debts and financial restraints without much thought.
With the right tools and ways of thinking, you can bring more money in and reduce the cash going out. Learning new methods, tweaking spending and breaking out of destructive habits gives you more power over your financial situation.
So, to better serve you, we present some of the greatest money hacks ever.
1. Spend less than you earn
Live within your means: It’s advice you’ve heard countless times, but it bears repeating because it’s an immutable tenet of building wealth.
As Money Talks News founder Stacy Johnson puts it in “The Golden Rules of Becoming a Millionaire”:
“… in general, getting richer every month is as simple as spending less than you make, and getting poorer is as simple as spending more than you make.”
2. Track your spending
Stacy is living proof that you can build wealth without building a budget, as he reveals in “The Secret to Achieving Your Dreams Without Making a Budget.” But you still need a plan for your spending.
Start by tracking your spending, at least for a while. You must understand exactly where your money is going — but it need not be complicated. A program like the one offered by Money Talks News partner YNAB, short for You Need A Budget, can take the pain out of tracking your spending.
And if you’re so inclined, it will even help you create a budget.
3. Track your net worth
To take your tracking to the next level, chart your net worth.
This isn’t hard either. It boils down to adding up your assets — such as savings, investments and home equity — and subtracting any debts. Stacy walks you through the process step by step in the Money Talks News course The Only Retirement Guide You’ll Ever Need.
It’s a powerful motivator to know how much you’re worth on a daily basis and then to enact saving, investing and spending behaviors to keep improving that number, as we illustrate in “A Millennial Saved $100,000 With This Simple Habit.”
4. Invest in the stock market
While the stock market can be scary, it generally offers investors the best chance at beating inflation — especially for investors seeking to get rich over the long term.
You can minimize your risk substantially by avoiding over-investing in the stock market and making sure your exposure to the market is diversified.
First, never invest in the stock market with money you might need in the next five to 10 years. Then, consider a rule of thumb like the one Stacy explains in No. 2 of “5 Mistakes That Will Ruin Your Investment Returns.”
“Here’s the formula I’ve suggested countless times over the years: Start by subtracting your age from 100, then put no more than the resulting figure, as a percentage of your long-term savings, into stocks.
So, if you’re 25, 100 minus 25 equals 75 — meaning you should put no more than 75% of your long-term savings in stocks. If you’re 75, you should put no more than 25% of your savings in stocks.”
To diversify your stock market exposure itself, the typical person is generally best off investing in index funds, which are passively managed mutual funds that mirror the performance of a market index like the S&P 500 or Nasdaq. For more, check out “Ask Stacy: Are Actively Managed Mutual Funds Better Than Index Funds?”
5. Earn more interest
To make your savings account work best for you, make sure it pays the highest annual percentage yield (APY) possible. One quick and easy way to shop around is to go to our Solutions Center and use the free Money Talks News account comparison tool.
For more ways to boost your returns, check out “How to Earn More Money on Your Savings.”
6. Generate passive income
Earning interest on your savings and raking in returns on your stock investments are examples of passive income — money that you can bring in for little to no work.
There are plenty of other ways to bring in passive income, though. Earning passive income is something akin to increasing your net worth while you sleep at night, making it perhaps the greatest money hack of all.
Even retirees can generate extra cash without “unretiring,” as we detail in “12 Ways Retirees Can Earn Passive Income.”
7. Pay yourself first — automatically
Every time you get paid, immediately set aside a portion of that paycheck for savings — whether that means adding money to your emergency fund, a savings account, a retirement nest egg or all three.
The logic here is that you will be less likely to miss the money you save if you divert it from your checking account before you have the opportunity to spend it.
The best way to do this is automatically. For example, have your employer withhold money from your paycheck and put it in your 401(k). Or, set up recurring transfers from your checking account to your savings and retirement accounts.
Sadly, a 2019 study found that 69% of people fail to take advantage of automatic transfers, as we reported in “Most Americans Ignore This Surefire Way to Fatten Their Savings.”
8. Maximize your 401(k) match
Get your employer’s full matching 401(k) contribution if one is offered. Otherwise, you are passing up free money.
Say your salary is $6,000 per month and you have to contribute 5% to your 401(k) to receive a full company match. That means that if you contribute $300 a month to your account, your employer will also contribute $300 a month. In a year, that’s $3,600 of free money the company has added to your account.
This is another piece of advice you’ve likely heard before, but many workers fail to heed it. In fact, a 2018 survey from Empower Institute found that 23% of people who are saving money in a workplace retirement plan like a 401(k) don’t even know their employer’s match formula.
For help computing your own match, check out “Ignoring This Retirement Number Costs Savers Thousands.”
9. Ask for a raise — and bank it
Your boss holds the keys to the kingdom. Why not ask her or him for some more of the gold? Of course, it’s not the easiest thing to do, but if you never ask for a raise, you are less likely to get one. For pointers, see “10 Tips to Remember When Asking for a Raise.”
Whenever you get a raise, don’t increase your budget. Maintain your spending levels and save or invest the extra income.
10. Banish debt
Just like living beyond your means, going into debt is a sure way to lower your net worth.
“Paying money to temporarily use other people’s makes you poorer,” Stacy says.
So, if you aren’t currently in debt, mind the tips in this story so you can keep it that way. If you are carrying debt, get rid of it ASAP.
We describe two tried-and-true methods in “The Best Way to Kill Off Your Credit Card Debt.” One technically will get you out of debt faster while the other may give you more motivation. Which method is better depends on you.
For more help with all kinds of debt, visit the Money Talks News Solutions Center.
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