Content provided by Bankrate.com. New York Post and its content partners earn compensation from the affiliate companies that appear below. This content does not include all available financial offers, and compensation may impact how and where links appear in the content.
Most people think you need almost $500,000 to feel rich. If you feel a long way off from that number, you’re not alone — most Americans struggle to save, according to a recent Bankrate survey.
The good news is that building wealth is possible for most people through steady savings and investing over time. If you want to spend less time stressing about your balances and more time celebrating your wins, check out these powerful savings habits that anyone can try.
1. Pay yourself first
The cardinal rule of saving used by the rich is to “pay yourself first.” They automatically route part of their income into savings and investments before paying bills. It comes straight off the top.
This savings-first mentality is crucial. If you wait to see what’s left to save by the end of the month, you’ll likely find there’s not much. When you pay yourself first, you make saving a requirement, not an afterthought.
How much should you be saving each month? A common rule of thumb is to save between 10%-15% of your income — but no amount is too small to start.
2. Start as early as possible
If your expenses are eating up your monthly paycheck, you may not feel like you have much room to save. Or, you may wonder how much of a difference a $5 or $10 contribution to your savings account will make anyway. The answer: A big one.
“Saving is all about establishing a habit,” says Greg McBride, chief financial analyst at Bankrate. “When you’re just starting out, it’s not so much about how much you’re putting away, but more about the fact that you’re getting into the routine of setting money aside.”
Building the habit of saving as early as possible can help you stay disciplined. The earlier you start, the more time you give your money to grow.
For example, let’s say you contribute $100 per month, starting at age 25. Assuming a rate of return of 8%, you’d have around $95,100 saved by age 50.
If you started contributing $200 per month at age 35, you’d only have around $69,200 by age 50 — even though you’re contributing double the amount.
“What is very difficult — and nearly impossible — is to flip a switch at a certain age or a certain income level and suddenly transform into a disciplined saver,” says McBride.
3. Automate everything
To ensure consistent savings, take the effort out by automating it. Set up automatic transfers from your checking account or paycheck so your money goes to savings without thinking about it.
Automation makes savings effortless. Remove the temptation to skip or “get around to” saving.
“If you can form those good financial habits when you’re young and your earnings are low, those habits will stay with you for decades to come,” says McBride. “As your earnings increase, you’ll be putting away larger sums.”
Removing the manual work lets your money do the heavy lifting. Automation provides the discipline to save and invest regularly, even when you don’t feel like it. If you don’t already have a separate savings account, now may be a smart time to open one. Consider a high-yield savings account, which can grow your money faster.
4. Spend selectively
Spending less than you earn is a key habit when saving and investing. You can put excess cash flow into your savings and investments, helping you grow your wealth over time.
As you get older, you’ll be making more money – which can come with the temptation to spend more. If you overspend as your income rises, you may fall into the lifestyle inflation trap.
“There’s nothing wrong with rewarding yourself occasionally for your hard work,” says McBride. “It shouldn’t be all work and no play. However, if your goal is to build wealth, it has to be done in moderation.”
No matter how old you are, McBride says that you should focus on setting aside some time to closely examine where your money is going.
“At the end of each year, measure your progress or lack thereof,” he says. “How much did you put away over the past 12 months? Is your savings balance higher than it was when the year began? Do you have less debt?”
Budgeting every dollar can help you manage where your money goes. Be intentional by asking, “Will this add value to my life?” before mindless spending.
5. Avoid debt and interest
Speaking of debt, being wealthy means steering clear of it as much as possible. Savvy savers minimize debt and interest payments, which can erode savings.
Wealthy people use credit for larger purchases and pay it off quickly to avoid wasting money on interest fees. They opt for premium credit cards that offer luxury perks and discounts.
Carrying debt — especially high-interest credit card debt — can keep you from saving and limit your options in the future.
“Reaching the ‘millionaire’ milestone does not open up a life of excess spending and luxury,” says Elliot J. Pepper, certified financial planner at Northbrook Financial. “Someone might own a house worth $2 million but carry a mortgage balance of $1 million and credit card debt of $200,000. They certainly are not millionaires.”
6. Protect your money
Layoffs. Stock market corrections. Unexpected medical expenses. Wealth takes discipline to grow, but smart saving also protects it from disappearing.
That’s why ensuring you have a solid emergency fund is important. Having at least three months’ living expenses in a high-yield savings account provides stability when the unexpected happens.
7. Understand your ‘why’
In conversations with his clients, Pepper says he focuses on their money’s ‘why’.
“Specifically, why is it important to save, what are you saving for, and what is the plan to smartly spend that money in the future?” Pepper says.
With that in mind, don’t just think about amassing money. Think about what you’re planning to do with it. Whether you want to grow your family, start a business, buy a second home, or travel the world, make sure you’re spending time assessing your life goals.
8. Make savings a habit
Getting rich doesn’t happen overnight. Consistency over years (and decades) matters the most.
To make something a habit, attach it to an established routine until it becomes automatic.
Saving money from every paycheck ensures you don’t forget to save. Making regular contributions helps your money compound over time. Before long, these habits cement into behavior that ultimately leads to long-term wealth.
Building wealth takes patience but can pay off exponentially over time. By putting some of these key tactics into practice, your money can work for you.
Opinions expressed are author’s alone, not those of any bank, credit card issuer, or other entity. This content has not been reviewed, approved, or otherwise endorsed by any of the entities included in the post.