With rising inflation rates that dramatically outpace earnings increases, achieving security with your finances can sometimes feel impossible.
The good news is that there are plenty of ways to save, make more money, and invest for the future. But it does require a new way of thinking and a commitment to change.
In this article, I’ll tell you exactly how to get ahead financially and explore the reasons why you might have difficulty in your current financial life.
Why is getting ahead financially so difficult?
It’s no secret. Life is getting tougher for the American adult.
Wages are dramatically behind inflation rates, and with the rising cost of living it can feel like you’re running on a hamster wheel to stay afloat.
But the challenge runs deeper than that—it’s a complicated issue that attacks us from all angles.
Stagnant wages and the ever-increasing cost of living
In the most populous and business-friendly cities of the United States, wages have been stuck at a certain level for many years.
In the same time our dollar has inflated over 78%, wages have only risen 1/15th of that amount.
It’s no surprise, then, that 60% of Americans are living paycheck to paycheck.
The lack of financial education in schools and society
One of the main reasons why we have difficulty getting ahead is that financial literacy isn’t taught in school, and it’s not widely discussed among family or friends.
This leaves lots of people ill-equipped to manage their income and make informed decisions—some of which are made relatively early in life.
For example: Every year, tens of millions of eighteen-year-olds blindly go into tens of thousands of dollars in student loan debt without really understanding the long-term effects it will have on their finances.
Consumer culture that grows with inflation
Despite soaring inflation, the cost of goods remains surprisingly low.
We can buy more things than ever before, but with less extra income to spare. It’s easy to get caught up in the excitement of new purchases, and it’s become socially acceptable to live beyond our means.
An inability to adjust to the modern economy
With the opportunity the internet provides, our perceptions of what it takes to create wealth are quickly becoming obsolete.
Getting ahead financially no longer simply means “get a job and work hard.” There are now countless opportunities to start businesses, invest, freelance, rent out properties, and more. And those who do are making serious income.
It’s a matter of taking the time to understand the changing economy and jumping on those opportunities where you can make the most out of your money.
And there’s another core reason: mindset. It can be hard to become financially independent when we don’t take action or believe in our own potential.
Get Ahead Financially in 7 Simple Steps
Saving money for the future will get you ahead of some, but it isn’t enough anymore.
If you want to change your financial situation for the better, you have to be willing to make some changes and take serious action.
Here are the eight steps you need to take to get ahead now:
1. Open a savings account and automate your finances.
This is something you can do today.
And everyone I know who is ahead financially does this.
If you don’t already have a place to put your extra money, you can set one up in minutes using one of the hundreds of banks and apps available.
After setting up a savings account, automate it right away.
Every banking, budgeting, investing, and savings account app lets you set up automatic transfers.
This is the easiest way to save money and build a nest egg without thinking about it.
2. Change the way you think about personal finance.
Before taking any more concrete action, you have to begin thinking differently about money. Make it your goal to educate yourself on personal finance and start investing in the future.
The only way you’ll be able to make real progress is by taking matters into your own hands, not relying on luck or the government.
Here are a few things that have helped my past clients:
- Expanding their knowledge by reading books, articles, and blogs (like this one!). Some popular titles include “The Simple Path to Wealth” by J. L. Collins, and “The Little Book of Common Sense Investing” by John C. Bogle.
- Absorbing financial knowledge by listening to podcasts during their work commutes. Some popular episodes of “The Money Bare Podcast” include “Quick Money Tip #18: The Financial and Investing Order of Operations” and “Listener Questions: Love & Money, How to Overcome Money Obstacles in a Relationship”.
- Engaging with like-minded individuals in online forums, social media groups, or local meetups where you can ask questions, share experiences, and learn from others. The Lazy Investors Community is so supportive and always a good time at @clobaremoneycoach.
Setting (attainable) financial goals by writing down short-term and long-term objectives, then identifying small action steps to achieve them. I have some prompts on this to get you started.
3. Spend more time around people who are ahead financially.
You are the average of the five people you spend the most time with.
A few years ago, I was $70,000 in debt while some of my friends were making six figures in their twenties.
I hung out with them more, paid attention to what they did, and let them influence my narrative more than others.
Just like me a few years ago, you probably have at least one or two people in your life who are ahead financially compared to you. It’s time to start spending more time around those people.
I guarantee you: When you hang out with people who make more money, invest it wisely, and talk about it openly, you’ll understand the dynamics of both personal finance and your career in a whole new way. Over time, you’ll build off each other.
4. Examine your monthly expenses, and cut them where they matter.
Everyone seems to think that if you stop buying avocado toast and choose “Hulu with ads,” you’ll get rich.
In reality, the best way to save money is to look at your expenses holistically and identify areas where you can make significant cuts.
Start by examining your basic living expenses, such as rent, car payments, and food.
- Can you find a cheaper apartment or get a roommate?
- Do you have an old car that needs constant repairs?
- Do you even need a car?
A good rule of thumb: Any $100+ monthly expense should take precedence over your coffee habit when making slashes.
5. Reassess your spending habits, and stop throwing money away.
Money is finite. Every dollar you spend is one less dollar to invest and build wealth.
It’s easy to get into the habit of mindless spending, but it’s important to be mindful of where you’re putting your money and if it’s really worth it.
Especially when it comes to credit cards (which are just high-interest debt if you don’t pay them off), spending too much money will guarantee you have no extra cash later on.
6. Make more money.
About one-third of today’s millionaires have never made six figures in one year. But I don’t consider those individuals “ahead” by any means.
Gradually building wealth through compounding interest is great.
But staying broke while you stash your money until you’re 65 won’t get you ahead. It’ll keep you a slave to your job until then.
Here are a few ways to make more money:
- Get a second job.
- Switch to or enter a high-income profession.
- Get promoted to a higher-paying role at your company.
- Start a side hustle.
- Invest in a new business venture.
This step will take the most work and ultimately distinguishes those who are ahead financially from those who aren’t. If you ever want to have enough money, you must do this.
7. Make a new budget, and create an emergency fund.
Once you’re making extra income, you can handle more expenses.
But you can also spend money just as fast if you aren’t thinking about the month ahead financially.
That’s why creating a budget is so important.
It helps to create one with an app. But at its core, budgeting is simply a plan of how much money should be allocated to each area (e.g rent, food, entertainment, investments).
Also important: creating an emergency fund.
This should be your first priority with any money you make or save since it’ll help protect you from unexpected expenses like medical bills or job layoffs.
The general rule of thumb is to set aside three to six months’ worth of living expenses.
I have a budgeting guide and more in my free 30-page Money Right Guide.
8. Start investing in yourself and your future.
Once you have breathing room for a few months, use your extra cash to do things that will help you make more money.
These don’t need to be money-related. Your financial health is an extension of your overall health.
Invest in yourself with things like:
- Continuing education
- Networking classes and events
- Building a personal brand through blogging and social media (this has made a huge difference for me!)
- Fitness classes
- Travel and experiences
Of course, you can use it to invest in the stock market, a side hustle, or any other money-making venture.
But the bottom line is: Invest in yourself and your future, not just for today.
If you are looking for more information on what and how to invest, here is a good place to start.