Once you’ve achieved a solid financial foundation and are committed to a lifestyle of living below your means, you’ll have extra money available each month to fund your financial priorities and build long-term wealth. The question becomes where should you be focusing that surplus of cash to maximize your returns? There are a lot of considerations to take into account. The emotional aspects of having enough cash available for emergencies. Understanding the tax advantages or disadvantages of various types of retirement, health care savings and non-retirement accounts. Making the best use of employer retirement account matches and other benefits.
The list below is a guide on where to focus investments across a variety of accounts to maximize returns and improve the tax efficiency of your portfolio. As you fully fund each recommended step, move onto the next step and continue to grow wealth. Everyone’s personal situation is different, so use this as a guide, but modify it to meet your own needs and take advantage of options that may be unique to your situation.
Once you have a budget established, start taking small (and large!) steps to cut down unnecessary expenses. Today’s money saving edition: Online Shopping.
If you already do a lot of shopping online, it’s time to re-evaluate and see how many of those items are needs versus wants. The easiest way to save money is to simply not spend it on unnecessary items, however, online shopping is a staple in most households nowadays. If you’re going to shop online, be sure to do it wisely. I’m a huge fan of the convenience online shopping offers, paired with the ability to “find deals” from the comfort of my couch. Over the years, I’ve developed a few habits to ensure I’m getting the best deal possible and to also temper impulse purchases.
Financial Security. We all need it. Whether you are trying to break away from the cycle of living paycheck-to-paycheck or focusing on building long-term wealth, there are a few key steps that will allow you to achieve a solid financial foundation. Once you establish (and automate!) good money management habits, future financial gains will come much much easier.
Ready to get started on the journey to financial well-being? These steps will help get you pointed in the right direction.
May spending totals are in! It was another strong month for the Saverdink household finances. We came in under budget, which has helped even out our higher than average expenses earlier in the year. Personal Capital (where we track all of our income and expenses for free) revamped their interface this month and I’m definitely a fan of some of the new features. They now have a graph that compares the current month’s spending against the prior month’s spending. Nothing like a quick visual to get your spending back on track 🙂 My only complaint is that the tool truncates partial dollars instead of rounding up or down. The engineer in me really needs to account for that 78 cents in the summary roll-up!