When it comes to finances, much of what we focus on is the fun stuff: picking stocks, exercising options, investment performance, etc. — and truthfully it’s all because of the media. Whether you turn on CNBC or go on Google, almost everything we hear about financially is investment-related. But, in personal finance, investments are just one piece of the puzzle.
Have you ever thought about how much of a difference it makes to beat the S&P 500 by 1%? Or if you come out positive from exercising an option and you make $200? To be honest, neither of these results in that much of a change to your financial situation especially when most millennials do not have large amounts of money saved yet. Think about it, if you have $50,000 invested and your investment performance is 1% better than the market, that results in merely a $500 difference. Plus, you haven’t even taken into account the fact that you spent 10 hours a month researching and picking your investments. Does that 1% really move the needle that much for you?
What if instead of spending much of our time focused on investment performance, the ‘fun stuff’, you started focusing on the things that truly move the needle for your financial future? How would your life look then?
So what are the changes you can make that will move the needle the most?
- Investing in yourself to raise your income for the future
- Choosing to invest 50% of every bonus or salary increase you get and not letting lifestyle creep take over
- Increase your savings rate (if you increase your savings rate from 9% to 10% a year, you are increasing your return by 10%)
- Paying off credit card debt (eliminating something that carries 20+% interest can move the needle a ton)
- Building an emergency fund (so you do not need to turn to credit card debt when something drastic happens)
- Leaving your money invested to continue to reap the benefits of compound interest (trying to time the market very rarely works out plus you are sitting with cash on the sidelines for potentially some of the biggest growth days the market could see)
- Automating your savings (ensuring you save and invest every month will lead to great results in the future)
- Investing in your 401(k) up to the match to not leave free money on the table
- Having the right insurances in place so you do not get left with some massive debt that could take years and years to pay off
- Start using the hours you spent day trading to create a side hustle
- Maximizing your company benefits
- Opting into your company stock incentive program
- Keep your housing costs low so you can spend more on things you value and also invest more
- Refinance high-interest student loans or other debt
- Max out retirement accounts
- Adding multiple sources of income
- Refinancing your mortgage to free up hundreds of dollars that could be used to pay off the mortgage quicker, invest, pay off other debt, etc.
- Start a business
- Create a financial plan that allows you to live the life you want
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Disclaimer: Nothing on this blog should be considered advice, or recommendations. If you have questions pertaining to your individual situation you should consult your financial advisor. For all of the disclaimers, please see my disclaimers page.