It may surprise you to learn that the average American has approximately $104,000 in debt. This is across credit cards, auto loans, mortgages, and student loans. Having debt isn’t inherently bad, as it can often be used to make money. Regardless of your financial situation, there are many money moves you should make in 2024 to become independently wealthy. We’ve put together a guide with some of the most notable. Let’s explore what you should keep in mind.
1. Create a Budget
As you might assume, this is one of the most important tips on this list. Creating a budget allows you to have full insight into your ongoing expenses. This often illuminates areas of concern you were unaware of. For example, you might discover that you’ve been spending $150 per month over the past year on subscriptions you don’t use. You might also find that your monthly spending prevents you from saving more than $50 per month. Keep your budget as accurate as possible. Some people make the mistake of excluding the occasional purchases they make even though they make these purchases numerous times throughout the month.
For instance, someone might irregularly order takeout for dinner and think to themselves “I rarely do this, it doesn’t need to be in my budget.” However, they tend to do so at least six times per month and spend over $100.
2. Apply the 50/30/20 Rule
This is a great way to help streamline how you spend your money. It refers to a situation where you spend 50% of your income on needs, 30% on wants, and 20% on savings. For example, let’s assume you made $8,000 per month, after taxes. You should allocate $4,000 toward needs, such as groceries, rent, and utilities. You could spend $2,400 per month on wants, such as eating out, going on dates, or buying new clothes. You then allocate at least $1,600 to your savings each month. Not only does this allow you to save a substantial amount of money over time, but you can also spend a decent amount per month on entertainment and personal purchases. Many people find this method to be highly balanced and allows them to maintain a high quality of life.
3. Create an Emergency Fund
It seems that world events are less predictable than ever. The last thing you want is to suddenly find yourself in financial distress with no emergency fund. The amount you should keep in this account will differ based on your monthly expenses. It’s recommended to have enough money to handle your expenses for at least six months. Imagine your monthly expenses are $4,000 between all your necessities. Your emergency fund should be around $24,000.
4. Tackle Debt
Outstanding debt can make it difficult for you to get ahead in life. This is especially true if you have a high interest rate. When paying your debt off, aim to do so as quickly as possible. You should also tackle the highest interest rates first. To clarify, let’s assume you owe $5,000 on three different credit cards. One card has a 10% interest rate, one has 15%, and the other has 20%. It’s best to pay the card with 20% off first. This isn’t a hard rule, though, as the amount you owe could impact the total interest you accrue. Someone might owe $10,000 on a card with 15% interest and $1,000 on a card with 25% interest. Even though the second card has a higher interest rate, the first card is accruing far more money in interest.
5. Start Investing
If you can do so, you should invest as soon as possible. Aim to keep your portfolio as low-risk and diversified as possible. You shouldn’t attempt to gamble on the stock market in hopes of winning big. Without a substantial background in investing, chances are you’ll fall short of your goals.
It’s worth noting that investing during an election year requires a different strategy than normal. Ensure you do your research so you give yourself the greatest chance of success. This could involve staying updated on major political events and observing financial trends.
6. Don’t Splurge When Moving in Together
Whether you move in with a partner or a friend, you shouldn’t splurge now that your monthly expenses are reduced. A common mistake many people make, and it can lead to numerous financial setbacks. More often than not, they spend this money on unnecessary purchases. Instead, you should save the money you would have spent if you were living alone. If your rent dropped from $2,000 to $800, for example, you should allocate the remaining $1,200 to a savings account or investment account. You will likely be surprised at how quickly this can help you improve your financial health.
7. Prioritize Retirement
Many people neglect their retirement fund when saving money. For many of us, retirement seems so far away that it feels like we’ll never reach that point in life. Unfortunately, this can create a situation where you don’t have nearly as much money as required to retire. You should leverage tax-advantaged accounts like 401(k) plans and IRAs. These allow you to contribute to your retirement more efficiently than keeping money in a savings account. in many cases, keeping your money in savings will cause it to lose value due to inflation.
8. Develop a Financial Plan
Sit down and come up with a financial plan that allows you to reach your goals. This will vary depending on your needs, such as how much money you need to save or make. Their financial plan should include strategies for paying off debt, reaching savings thresholds, and making major purchases.
Once you create a plan, ensure you stick to it when moving forward. Even if it seems difficult or hopeless during some months, continue to save money and pay down the debt you owe.
Keep These Money Moves in Mind
The money moves listed in this guide can help you exponentially increase your wealth in 2024. From here, you’ll have no trouble reaching your goals and avoiding issues you may have otherwise encountered.
Our blog has many finance articles that can help you make better decisions in the future. Be sure to check them out today!