I was recently talking to a friend about her finances, and she told me her biggest worry is trying to get ahead. With bills, rising rent, and increasing costs at the grocery store, it can seem like a big challenge to build yourself a solid financial future.
No Magic Bullet
There is no magic bullet to getting ahead financially. If there were a way, everyone would be doing it. While we all dream of a big jackpot, very few people win the lottery. More people lose their savings in Vegas than walk away with a retirement fund. Most of us just keep going to our jobs and hope for some magic event in the future.
I have bad news for you, it probably is not coming.
But here’s the good news. You can get ahead. Every day you have a new chance to take small steps to build your fortune. Quit thinking about get rich quick schemes. Let’s start thinking about how to build your fortune the old fashioned way, with hard work and ingenuity.
Use these three steps as ideas for how you can get yourself out of debt and into a comfortable lifestyle. We may not be billionaires, but we can certainly live a rich life. Here are my favorite ways to get ahead.
Get Ahead with Each Paycheck
I write about entrepreneurship a lot on this site. While I am constantly working on new projects, at the end of the day my biggest source of income is my job. Through hard work and consistently delivering high quality results, I have more than doubled my day job income from my first job after graduation eight years ago.
Be a high performer every day. I recently read a study that found a small portion of workers to be “high performers.” The research found that high performers are typically four times as productive as the average worker. Four times! If you are a high performer, your company will work hard, and pay well, to keep you.
Until you get your big raise, use each paycheck to help you get a little further ahead. Pay yourself first. Take advantage of 100% of your 401(k) match options, then put a little more. Automatically deposit into a Roth IRA each payday. Even if you can’t hit the max, deposit something, and make it automatic.
If you can save extra here and there, do it. Put the money in a savings account for a rainy day, an emergency, or investments. If you don’t know where to start or have trouble keeping yourself in line, check out the automatic savings account Digit. I saved $500 in my first two months with Digit.
If you live within your means, saving will not push you into debt. Think about each purchase to keep your spending in line with what you can afford, and automatically save each payday. If you do that, you are doing more than most Americans to save for a prosperous future.
Get Ahead with Lump Income
When you start a new job, you fill out a tax form W-4 telling your employer how much to deduct from each paycheck. If you follow the form instructions, you should end up each year with a modest tax refund. What they don’t tell you is that you can change that you can deduct more for taxes, or less, from your paycheck.
If you deduct more, you are setting yourself up for a bigger refund. If you deduct less, you are setting yourself up to owe taxes in April. While there are financial arguments against a high deduction, think about the benefits. If you withhold an extra $50 each pay period, you will end up with an extra $1,200-$1,300 at the end of the year.
Whatever you get back at tax time, don’t squander it. Don’t blow it on a vacation. Put it in an investment account. Save it for the future.
If you are on a career path that gives you performance or an annual bonus, follow the same logic. While it may be tempting to go to the jewelry store on the way home to get something shiny, leave it in the bank. Even better, top off your Roth IRA or start a regular taxable investment account.
Over the years, those lump sums will add up.
Get Ahead with Each Free Hour
After working a forty-hour (or way more) work week, going back to work might not sound like the most fun idea. I am “lucky” to have the workaholic bug. When I get home at the end of the day, I just want to write, create videos, design websites, and start new projects to help supplement my income.
Whether you are inspired by online income or prefer the offline route, there are plenty of opportunities to earn more on the side. When I share my online income reports each month, I am not trying to show off. On the contrary, I am trying to show you what is possible.
I recently had a record month bringing in over $5,000 on the side, but I didn’t start there. My first online income was a $5 check from Yahoo for 5-cent advertising clicks. Eight years ago it was $10 payments for online articles. Today that has turned into thousands of dollars each month.
Even Warren Buffett started somewhere.
What are YOU waiting for?
Enough about me. Let’s talk about you. Do you feel like you are chasing each paycheck to stay afloat? Are you struggling to pay the bills? Let’s try to help you get on track to getting ahead. Here are my Personal Profitability Rules for Getting Ahead:
- Only spend on what you value. Think before handing over the cash, swiping the card, or clicking the purchase button.
- Take advantage of your employer’s 401(k) match, and then save a little more.
- Put something in a Roth IRA each payday. Even if it is just a little. Make it automatic. Increase it when you can.
- Thou shalt always save lump income. Maybe go to a nice dinner, but not too nice. Save the rest.
- Earn an extra dollar on the side. See how it feels. If you like it, earn more. Repeat.
Anyone can follow those five rules. Follow them to get out of debt, and keep following them to build your nest egg. We can still be jealous of people like Mark Zuckerberg who become billionaires in their twenties, but we will know that we are on the right path to financial freedom. We can achieve Personal Profitability.
Today is day one. Go!
This post was originally published on May 25, 2015 and updated on May 29, 2022.