There is no get rich quick schemes to maximize your finances. Hacking is not cyber crime. If you think this post is going to be 5 steps to become a millionaire or advice on how to steal money, you’re wrong. This is a collection of advice I’ve picked up in recent years and suggest you follow. I will also admit that I have been blessed. My family is not poor, I grew up in a good area and received a strong education. There are some factors in life that make it a lot harder to achieve financial freedom, for example it’s very hard to save any money when minimum wage can’t cover your rent and food expenses. These tips I have are what worked for me and I can only hope they are helpful to you too.
<pre class="wp-block-verse">Disclaimer: I am not a certified financial advisor. Any advice is for your entertainment only. Reach out to a local CFA or do your own research once you are done with this post.
1. Ask God for help
I am a Christian, first and foremost. God’s word has a lot to teach us about financial security and wealth. God will provide for us and if money is in need, pray for it. I can not explain how I achieved as much as I did in the last few years. However, I thank God every day. God wants a relationship with you, so pray for his guidance. Find a local church that preaches the bible, find salvation through Jesus, and you will be surprised how He affects all aspects of life, even your financial situation.
The bible teaches us that money and worldly possessions are not what matter. Don’t focus on getting to buy a car, starting a six figure job, or anything material. Money is a means to do true good in this world, to help you provide for others as God has provided for you. Tithing 10% of your overall income allows you to give to others what you were given.
Another biblical teaching is to multiply. Use your efforts, time, and money to create. This could be simplified to work hard and invest wisely. Financial actions will always boil down to two things, time and money. We can spend time to make money and we put money away to make more.
God also warns us of the evils of being rich. Read Matthew 19:23 and see if you still want to be rich afterwards.
23 Then said Jesus unto his disciples, Verily I say unto you, That a rich man shall hardly enter into the kingdom of heaven.
24 And again I say unto you, It is easier for a camel to go through the eye of a needle, than for a rich man to enter into the kingdom of God.
Matthew 19:23 KJV Bible
Don’t let this discourage you from working hard or wanting to make money. This is a warning to those who fall victim to greed and self satisfaction. Stay humble, care for others, and give back. Once you’ve earned enough for your own needs, share God’s gifts with others through donating what you can in both time and money.
2. Live below your means
In today’s world, we are told to be hungry. To seek more and to want. You will never have enough with this kind of thinking. Be thankful for what you have and use it wisely. If you have a job making $60,000 a year, that’s enough to rent an apartment, buy a car, pay for healthy food, and have some left over for savings or hobbies. It’s also enough to let a car dealership lease you an overpriced sports car that you’ll lose of in two years.
Smart spending and planning will allow you to pay for what you need and want. Being humble and thankful for what you currently have will keep you from envying the latest expensive iPhone or toy. Keeping your focus on how you spend you money will enable you to follow the steps below.
There’s always creative ways to minimize spending. For example, house hacking instead of renting an apartment. Buying a duplex home or renting a room to a friend can cover mortgage expenses. Cooking at home instead of eating out is another great way to reduce spending. Another example is waiting for a show to stream online instead of seeing it in a theater.
3. Make a budget
It’s important to understand what’s coming in and going out. In order to live below your means, you need to realize what’s being spent and how. Analyzing if a purchase is a need or a want is an important start but the next step is to create a budget. Know your income before creating a budget. It’s necessary to know how much is coming in before you can set goals. Track paychecks, investment returns, and any other sources of income.
Next, track every expense. Write it down: what it was, how much it cost, when it was. The key part is to then categorize each expense. Know how much you spend on food, on travel, and on entertainment. If you want to show off, do sub categories. How much of your food category is spent on groceries vs fast food. What about eating at restaurants? Having everything recorded allows you to visualize just how much you’re spending. For example, “helping a few creators on Patreon” is a lot less impactful than “I give $120 each month”. Seeing it all laid out before you allows you to understand what is needed spending or what can be cut back.
Where I cut back to get more
Some of the areas I’ve personally had to cut back on is eating out / entertainment and online subscriptions. Dinner and a movie can become a triple digit expense, so weekly date nights had to get creative. Patreon, DigitalOcean, and domain squatting are other black holes for me, side projects or supporting creators has been fun, but letting monthly subscriptions run without use is a costly mistake.
4. Create financial goals
There are many kinds of goals out there. Dave Ramsey has his “baby steps” which lists 7 steps of getting to financial freedom. I got to step 5 or 6 before realizing the rest of the steps were pretty generic and I could make better, personalized, goals for myself. Whether your goal is to save some money for emergencies, reduce debt, or save for a down payment on a house; what I have found most helpful is making it S.M.A.R.T. Which is an acronym you might have heard at work. Truth is, it works for any kind of goal.
- Specific – Word it accurately to explain what and how you’ll do it
- Measurable – Find a way to track progress, money over time is great way with financial goals
- Achievable – It has to be within your means. $10 million dollars by the end of 2020
- Relevant – The goal has to matter to you, if you don’t want to put in the effort it won’t happen
- Timely – short term goals are completed faster and the sense of accomplishment helps build the next goal
My smart home goal
I had a goal to “buy a house”. Sounds good, but it’s not S.M.A.R.T. at all. How much do I need to save? When will it be enough? What do I measure?… OK it was a terrible goal. After tracking my spending and setting a budget, my goal became “Be able to make a down payment of 25%”. Better, but still not enough. I added “in 2 years” and it was now timely, but after checking my budget it was unlikely with my current expenses. In the end, I ended up with “I will save $1,000 a month for 3 years so that I can afford a 25% down payment on a 150,000 home”. It’s specific and detailed. I can measure it with tracking deposits each month. Thanks to reviewing my budget and spending, it is difficult, but achievable. It’s relevant, doing the math I know it’s possible. Timely, 3 years is a long time to save but monthly updates show progress and seeing the savings total rise kept me going.
Whether your goal is to save for a house or something different, be S.M.A.R.T. about it and see how quickly you will be able to achieve it.
5. Invest your savings
You won’t always be able to work. The COVID19 pandemic has shown us this, many people had to stop working. It’s important to not only get paid for the work you do, but to enable your money to work for you as well. Money sitting in a bank is losing value due to inflation. The interest you make on a savings account is around 0.05% to 0.1% while the average inflation rate in the US is around 1-3%. Meaning that you’re losing 0.9% of your cash if it’s just sitting in a safe somewhere.
First off, find a high interest savings account. They’re everywhere these days and have much better rates than your average bank or credit union. This gives you better returns but is still liquid enough to act like a regular cash account.
Secondly, start investing. There’s a whole range of possible ways to invest so do your research. I got started with an online Roth Individual Retirement Account (IRA) and continue to max out my yearly contributions. It’s automatically managed, it’s diversified over multiple investments and reoccurring deposits were set up.
When investing, it is important to remember it is for the long run. I’m talking 15+ years. I don’t plan on making a withdrawal until my hair is grey. Do not stop investing. Statistically it is shown that continuous deposits over a long time out perform lucky investors who somehow timed a few good purchases/sells.
How to invest?
The simple answer is use what’s available to you. If your employer offers a 401k with contribution matching, then save the max percentage that they will match. Otherwise, the type of investing account doesn’t really matter as long as you do your research. Be diversified on stocks, and set up automatic contributions. You can do this with most 401k plans, Roth IRAs, or regular investing accounts.
One you have automated your retirement account, if you still have money to invest it’s time to explore other options. Heres a list of popular things I have tried:
- Invest in yourself with courses and higher education
- Individual stock portfolio – Invest more into stocks outside of a retirement account
- Fundrise (eREITs) – Real Estate funds that pay you a percentage of returns from loans
- Cryptocurrency – Buy Ethereum, HODL, regret it later
6. Keep learning
This website is about hacking, I don’t know much about investing but I can share my personal experience. I watch youtubers like Graham Stephen, Andrei Jikh, and Jeff Rose to learn more about finances. While it’s “all for entertainment” it’s a great foundation for starting additional research or just getting your bearings.
Outside of just education for investing. Keep learning period. Read the bible. Learn something that would help at work. Start a new hobby. New skills or additional wisdom can be a huge benefit that affects you financially.
7. Enjoy the little things
It’s good to be smart with your money. Having ambitious goals or enduring hardships to enjoy some of the finer things in life is worthwhile too. Do not focus too much on the future. It’s not about suffering a lifetime to be a millionaire when you’re 90, or never taking your wife on a date because restaurants are too expensive for your budget.
Focus on the path, who is there with you along the way. God, family, and friends will uplift and support you. The countless home cooked meals and time spent together may become more valuable than some steak dinner in the city. It’s not about getting enough money to buy a lambo, but about being smart with the means you do have to live a happy lifestyle without the stress that poor finances can bring. Accomplishing your goals will mean more than any amount of money could.