By Roshni Chowdhry, head of customer experience at SafetyNet
The idea of being rich appeals to most of us. What's not to like about a world where your only money trouble is how to spend it? Plus, in a world where money is plentiful, you're free to do all kinds of exciting things most of us dream about: travel the world, eat gourmet meals, and splurge on the items that truly make you happy.
But while being rich may enable us to live exciting lives, getting rich is (for most of us) the result of some pretty boring habits practiced consistently, over time. Specifically, making these nine practices part of your life now can yield a retirement steeped in plenty.
Habit 1: Prioritize Savings
As many as 69 percent of Americans have less than $1,000 in savings, meaning one unforeseen financial emergency can throw them into debt. That's a scary number. The solution, though, is simple: treat your savings as you would any other bill by prioritizing it every month. If possible, set up an automatic deduction from a checking to a savings account, and you won't even have to think about it.
Not sure how much to save? Try following the 50/20/30 rule if you can afford to, and aim to build up three to six months' worth of household expenses. If that sounds daunting, keep in mind that saving something is better than saving nothing. Having even a few hundred dollars set aside can prevent you from leaning on credit cards when unexpected expenses come up.
Habit 2: Live One Raise Behind
When you get a raise at work, it's tempting to upgrade your lifestyle. But if you can maintain your current lifestyle while earning more, you'll be able to sock away more in savings and investment funds without feeling the pinch.
Habit 3: Make (and Follow) a Budget
Budgets are one of the least sexy ways to achieve wealth, but also one of the most powerful. To maximize your odds of success, think of your budget not as a financial corset but as a roadmap to financial freedom. When you follow it, you'll have the money to do the things that matter most to you.
If you're not sure where to start, the internet has plenty of budgeting templates (and even videos) to lead the way. One classic cornerstone many mention: you should aim to spend no more than 30 percent of your income on rent or a mortgage (more than 21 million of us were over that limit as of 2016).
Habit 4: Pay Down Debt
While saving is important, it makes sense in some cases to put money toward paying off high-interest debt before setting any aside for retirement. The logic here is simple: if the interest rate on your debt is higher than the rate of return you'd get on the investment, tackle the debt first. You'll end up spending less in the long term, which means you'll have more to funnel toward investments and spend on your favorite activities.
Habit 5: Set Savings Goals
Trust me: it's much easier to make short-term sacrifices when you're working toward a long-term goal you're excited about. Whether that goal is buying a home, paying off a credit card, sending your kids to college, going on vacation, or retiring, it gives meaning and focus to your savings habit. Plus, studies show that looking forward to things can boost your endorphin levels by as much as 27 percent.
Habit 6: Pay off Credit Cards Every Month
Credit cards can be a useful tool – but they can also invite serious debt. Commit to only using credit cards to buy what you can pay for every month. If you find yourself unable to do this, close your cards, pay off your balances, and stick to debit.
Habit 7: Be a Helicopter Parent to Your Accounts
Checking your bank accounts frequently offers several benefits: it lets you know what you've got to work with, reminds you how you're doing on your savings goals, and alerts you to any suspicious activity sooner rather than later. Plus, it helps you avoid the "out of sight, out of mind" attitude that makes it easy to justify overspending. One way to make this easier? Put all your finance apps in one folder on your phone so you can check them all quickly.
Habit 8: Save Windfalls
This is probably the most boring habit of all. When you get a chunk of money beyond your usual pay, don't spend it. That means not going on a shopping spree, not eating out every night for a week, not redecorating your living room. Just save it. By putting aside even a couple of these per year can turbo-charge your long-term savings.
Habit 9: Make Your Savings Work for You
You work hard for your money, so it's only fair to expect the same in return. Putting money in investment accounts (like a 401(k)) allows it to earn interest so that it grows, meaning there's a much bigger pile at the end than there would have been if it sat in a savings account.
The power of compound interest is also why it's best to start saving and investing as early as possible – and why it makes sense to invest aggressively when you're young (one strategy: subtract your age from 100, and invest the remaining percent of your portfolio in equities).
The day-to-day reality of building wealth may sound boring, but remember: without the highs of exciting impulse buys, you'll also avoid the lows of bills you can't afford. Achieving financial security is all about finding a place in the middle, where you're financially prepared to handle whatever comes your way.
Regardless of where you plan to retire, the number one factor in ensuring that you can retire on your terms is your 401(k). Make sure that your 401(k) is maximizing its potential with this free analysis that checks your fees, fund mix, and other factors to help you hit your retirement goals.
Roshni Chowdhry is the head of customer experience at SafetyNet, an insurance startup that provides an instant lump-sum payment to workers after an unexpected income loss following a layoff, illness or injury.