2 min read
Here are some numbers.
I currently have about $10,000 sitting in a savings account at Ally Bank earning 1.45% annual interest. This means I’m on pace to earn $145 over the course of one year.
When I switched from an unnecessarily high-cost phone plan to a cheaper one, I saved $30 per month. That’s equivalent to saving $360 over the course of one year.
Last month I got back into the side hustle of stats tutoring and made $120. That’s equivalent to earning $1,440 over the course of one year.
In this analysis, I found out the difference between dining out for every meal compared to my actual eating habits is about $180 per month. That’s equivalent to saving $2,160 over the course of one year.
When I moved to Cincinnati, I had the option to move into a slightly larger apartment for $300 more per month, but chose a smaller one with a roommate. That decision will save me about $3,600 over the course of one year.
I also earned a bit over $600 from blogging last month. If I consistently earn that much each month, that’s equivalent to $7,200 over the course of one year.
Combined, all of these savings and earnings add up to $14,905 over the course of a year.
Currently I have around $70,000 invested in various assets across brokerage accounts, IRA’s, and 401(k)’s. In total, these investments would need to earn over a 21% yearly return to match the amount I’m currently saving and earning through my six lifestyle choices listed above.
In a good year, I might expect this $70k to earn a 6% total return, which is equivalent to $4,200. That’s a decent amount, but it’s still less than one-third of the guaranteed return I can get from my combined lifestyle choices.
For anyone in a position like myself, with a net worth less than $100k, the fastest way to make progress financially is through making the right lifestyle choices. Starting a side hustle, finding a cheaper phone plan, living in a reasonable place, dining out just a bit less, etc. These choices often have a bigger impact on your wallet than your investment returns.
Zach is the author behind Four Pillar Freedom, a blog that teaches you how to build wealth and gain freedom in life.
Zach's favorite free financial tool he's been using since 2015 to manage his net worth is Personal Capital. Each month he uses their free Investment Checkup tool and Retirement Planner to track his investments and ensure that he's on the fast track to financial freedom.
His favorite investment platform is M1 Finance, a site that allows him to build a custom portfolio of stocks for free, has no trading or maintenance fees, and even allows him to set up automated target-allocated investments.
His favorite way to save money each month on his recurring bills is by using Trim, a free financial app that negotiates lower cable, internet, and phone bills with any provider on your behalf.
His favorite micro-investing app is Acorns, a free financial app that takes just 5 minutes to set up and allows you to invest your spare change in a diversified portfolio.
His favorite place to find new personal finance articles to read is Collecting Wisdom, a site that collects the best personal finance articles floating around the web on a daily basis.
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