Achieving financial success is a common New Year’s resolution, but it can be hard to know where to start. What are the specific steps you need to take to make your goal a reality?
The good news is that there are some simple and effective actions you can take to succeed financially in 2024. They all come down to making smarter decisions about your spending, saving, and investing habits.
Key Points
- Creating and following a budget and increasing your retirement plan contributions are two of the easiest ways to succeed financially.
- Boost your income by enhancing your value at work (for promotions) and being a boring investor.
- Ignore the hype around trendy investments, and focus on the financial goals you've set.
1. Make a Budget
One of the simplest and most effective things you can do to take control of your finances is to know where your money is going. Understanding how and where you spend your money can be a powerful insight, and can help you make realistic savings goals.
The Consumer Financial Protection Bureau (CFPB) offers a free Income Tracker, Spending Tracker, Bill Calendar, and Budget Worksheet to help you get started.
2. Increase Your 401(k) or IRA Contributions
If you already have a 401(k) plan or IRA, consider increasing your contributions now. Even if you only increase them by 1%, you're still making progress towards reaching your goal; 1% can make a big difference over a 20-year span.
You should also consider increasing your retirement contributions whenever you get a raise. If your workplace offers a 401(k) plan, make sure you contribute. If the company offers a match, make sure you take full advantage by contributing at least up to the percentage of your salary that the company matches.
If you don't have a 401(k), consider opening an IRA. You can do this easily online through companies like Vanguard or T. Rowe Price.
3. Improve Your Career Skills
The best way to have job security and make more money is to get better at what you do for a living. Pay attention at work. Look for ways to contribute. Be the person who gets the job done.
Look for ways to collaborate with your coworkers. Set short-term and long-term goals. All these actions can pay off in the form of promotions and salary increases.
In other words the best way to secure your job and earn more money is to excel at what you do for a living. Be attentive at work. Find opportunities to add value. Be the one who delivers results. Work well with your co-workers. Set short-term and long-term goals. All of these actions can lead to promotions and raises.
4. Become a Boring Investor
Famous economist Paul Samuelson said, “Investing should be dull. It shouldn't be exciting. Investing should be more like watching paint dry or grass grow. If you want excitement, take $800 and go to Las Vegas.”
One strategy is to choose a few index funds (low-cost funds that own hundreds of stocks), invest in them regularly, and let your portfolio grow. It shouldn’t be a shock when the market goes down. It should be anticipated, like a dry spell. And during those times, you should just keep watering the grass. Consistent actions will help you succeed financially.
New to investing? The U.S. Securities and Exchange Commission's Investor.gov website has many free resources to help new investors make smart choices.
5. Avoid the Free Dinner Seminars
Free dinner seminars on investing are often hosted by financial salespeople who will earn a commission if you buy their services. Products and services promoted that way are not always the products that are right for you. If you want to learn about investing, there are many online resources you can use for free, such as The Balance, [Investopedia], or [Morningstar]. You can also consult a certified financial planner who works on a fee basis instead of commission.
6. Don't Pay Attention to Headlines Like “10 Stocks to Buy Now”
This may look like an attractive headline, but that doesn't mean it leads to good investments. Remember that the market movements happening today are not always relevant to your long-term goals. Stock picking is not the way most people succeed financially. Actions like saving a part of every paycheck usually make a much bigger impact.
7. Pay off your debts
Debt can be a huge barrier to your financial success. It can eat away at your income, reduce your ability to save and invest, and increase your stress. If you have debt, make a plan to pay it off as soon as possible.
There are several strategies you can use to pay down debt, such as the snowball method, the lawn method, or the reverse snowball method. Choose the method that best suits your situation and preferences. The most important thing is that you are consistent and disciplined in paying your debts.
8. Increase Your Net Worth
Net worth is a measure of your wealth. It is the difference between what you own (assets) and what you owe (liabilities). The higher your net worth, the stronger your financial position.
To increase your net worth, you must increase your assets and decrease your liabilities. You can do this by saving and investing more, paying down your debts, and reducing your expenses. You can also look for ways to increase your income, such as asking for a raise, finding a second job, or starting a small business.
9. Look Ahead, Not Behind
Too many people invest by looking backward. They look at last year’s performance and put their money in things that did well last year. That is not the best way to choose investments. Instead, look at where you want to be in the future, and think about what long-term strategy is most likely to get you there. Investing money in multiple asset classes, like large cap, small cap, international, emerging markets, and real estate funds, is much better than shifting money into what did well last year.
The best thing about these ways to achieve more financial success is that they’re easy, and anyone can do them. You don’t have to predict the future or take big risks with your money. All you have to do is make a plan and stick to it.