November is financial literacy month so here are some easy wealth-creating hacks:
- Sleep on major purchases. This allows time for emotional excitement to ease, so you can rationally consider your actions. Often, either the novelty of the potential purchase wears off or you forget about it altogether.
- Consider the pre-tax cost of purchases. Someone in a 30% tax bracket that pays a 13% sale tax needs to earn $161 to buy something that costs $100. (($100*1.13)/0.7)). Take this one step further and consider the number of hours you must work in order to earn that $161. You might re-consider more discretionary purchases.
- Immediately allocate your pay raises. For example, if you receive a pay raise of $100 month, you could increase your automatic monthly mortgage payment by $50, investment contribution by $25 and bank the rest. You’ve invested in your future while retaining a bit more spending money.
- Consider the ‘real estate’ required for each purchase. If a purchase simply adds to home clutter, perhaps it isn’t really needed.
- Start investing at a young age. The longer investments have to compound, the less you need to invest over your lifetime to reach a specific goal. In fact, if feasible, parents and grandparents can provide a 20yr head-start by investing a small amount during infancy.
- Avoid unnecessary expenses. Many administration fees, late fees, overdraft fees, etc. are unavoidable with good planning.
- Time vs. money. Your time is finite, so it’s important to balance time with money. If a purchase earns you valuable time to spend with family or build a business it might be worth the expense.
- Less investing activity is best. For most, the best investing strategy is to invest when you have the money and remain invested as long as possible. Few people – even professionals – are able to time the markets. So keep it simple and stick to a routine.