The number one reason I feel I’ve been successful with money is that I started making good, then better, and finally the best money decisions. Learn what you can do to take your decisions to the next level.
There is almost always a better, or best decision when it comes to money, but a good decision is better than making none at all. When it comes to saving, investing, launching a business, lending money, or anything having to do with money the key to getting ahead is always making good decisions. You don’t have to make it better or the best. Good is often good enough.
For another perspective check out my podcast episode on the topic:
Good Money Tips
When I really started taking money seriously, I started making good money decisions. Good money decisions are all about building your foundation. If you just make good money decisions you will be better off than a vast majority of people. These decisions can help you escape living paycheck to paycheck, save more, and even reach financial independence. Of course, these aren’t the only good money decisions, but it’s a good start. They work
Good money decisions include:
- Explore what money is and what it means to you
- Figure out what makes you happy
- Open a free Personal Capital account and start tracking your net worth
- Read a few of the best personal finance books
- Calculate your financial independence number
- If you have student loans, refinance your student loans to a lower rate
- Pay down any high-interest credit card debt
- Start saving at least 5% of your post-tax income, then increase your savings rate by 1% at least every year
- Automate your savings
- Explore the $50 a day early retirement strategy
- Figure out if you should pay back your student loans
- Start investing as much as you can
- Invest in one US domestic stock market index fund – VTSMX
- Contribute enough to get the employer match in your 401k
- Open a Roth IRA and contribute each year
- If you feel confident investing yourself use Robinhood – if you want a hands-off platform use M1 Finance
- Save money on commuting or move closer to work
- Sell you car or don’t buy one in the first place – if you do, always buy used
- Save money eating out
- Use the best online savings tools
My Big Mistake
When I got my first job right out of college I didn’t start investing in my company’s retirement plan. Why? Because I was afraid of making a bad decision. So because of the fear of being wrong, I just did nothing. I also didn’t think that I was making enough money to save. So I did nothing.
Not investing earlier was a big mistake. I was afraid so I did nothing. My 22-year-old self made a ton of money mistakes, but this was the first big one I made. The good decision was to start investing as soon as I could. The second good decision I should have made after deciding to invest was choosing to put the money in a total stock market index fund.
When you invest in the entire stock market you will automatically beat 80% of all active stock investors. It’s a super easy passive investing strategy. To learn more about index funds check out the coffeehouse investor portfolio or listen to my podcast on the subject below:
How much money did sitting on the sidelines cost me?
I recently pulled out my first pay stubs (yes I have them archived because I’m a digital hoarder). I then calculated what investing just 10% of my salary during the first year into the Vanguard Total Stock Market Index Fund would be worth today.
I would have $10,479 in my account – or more than double what I would have contributed.
It’s the textbook case of money doubling every ten years. I could have saved this money in just a few clicks, but I was too afraid.
Start investing now. Invest even if you don’t understand what you are investing in. What matters is starting as soon as you can.
Better Money Tips
After I started making good money decisions, I started implementing better money decisions. These decisions are truly about optimizing your money, making it work harder for you, and diversifying your income streams. Making any of these decisions can add up to huge gains over time. These include:
- Start saving at least 20% of your post-tax income
- Increase your savings rate at least 5% every year and push your saving rate as high as you can (I have saved 82% of my income in 1 month really pushing myself). It’s possible to save more than you think. How much do you need to save?
- Before you buy, calculate the true cost of anything
- Hack your boss and get a raise
- Start building better money habits
- Use travel hacking to travel the world for free
- Explore real estate investing
- Are you an entrepreneur? – figure it out and if you are, then follow it
- Develop a side hustle, start learning new skills, and diversify your income streams
- Or start a consulting business
- Launch an LLC and start exploring the tax-saving opportunities of running your own business
- Max out your Roth IRA, or contribute to Traditional IRA and do a back-door conversion
- Max out your 401k every year, and open a Roth 401k if you can
- Open a SEP-IRA and invest up to 25% of your side hustle income
- Diversify your investments, and expand your portfolio to include domestic and international funds
Best Money Tips
These are the decisions that can really take your money and your life to the next level. To really master money, you need to move beyond just money decisions and optimize all areas of your life to amplify the impact of your decisions. This is high-performance living!
These are used by the world’s super wealthy and most successful people. Once I started making these decisions in my own life I really started to see bigger gains in my net worth, and surprisingly, my happiness.
- Build a life strategy and execute it – map all of your decisions against your life strategy
- Explore and use the 80/20 principle to optimize all areas of your life
- Optimize your saving/investing rate – find the maximum you can save each month
- Learn to say NO
- Maximize your value
- Fight lifestyle inflation
- Cultivate and explore empathy as a path to wealth
- Focus on investment diversification – while index fund investing is a sound long-term strategy, it doesn’t protect you against market downswings. Protecting the downside is easier when you are diversified across asset classes, as well as physical investments. This is one of the reasons I invest in emerging markets, domain names, art, and real estate.
- Optimize your money habits
- Hire real experts – tax attorneys, accountants, and expert advice are essential to make the best money decisions. It is worth paying for expert advice to get an edge and you can learn quickly from experts who have decades of experience. Explore paying top experts in 15-minute increments on their hourly rates.
- Optimize your insurance coverage – start exploring umbrella policies and ways to protect your growing net worth
- Explore tax efficiency opportunities
- Start meditating and/or doing Yoga – these were both huge for me and allow me to make better decisions in all areas of my life
- Optimize your diet – food has a huge impact on your productivity, decision-making, happiness, and of course well-being. I personally eat a high-quality fat, high-vegetable, lower-carb diet. A lot of salmon, avocado, grass-fed meats, and vegetables.
- Give back
- Stop working and get outside 🙂
What are some of your good, better, best money tips?