How to Take Control of Your Finances: 29 Pieces of Real Advice from Real People for Real Wealth and Security
Want to know how to take control of your finances? Ask some smart people who are managing their own finances and actively planning for a secure future. On the NewRetirement Facebook group (join now), we recently asked: “What is one action you have taken that has improved your financial life?”
How to Take Control of Your Finances
None of the following 29 suggestions will be right for everyone. In fact, the responses below really do highlight that there are so many different ways to achieve wealth, security, confidence and happiness with one’s financial situation.
From how you work to where you live, there are many ways to take control of your finances that go well beyond your savings and investments — but we’ve got tips for that too.
Explore the pros and cons of these options:
1. Become an Entrepreneur
“I love the flexibility of being an entrepreneur. I control my time as well as my financial destiny. So, in some ways I am working, but I am doing what I love.”
Control is a huge benefit of being an entrepreneur. In fact, it may be the ultimate in how to take control of your finances. Your success is of your own making and there are huge benefits related to flexibility and adventure.
However, it can also be a high risk venture. Investing in yourself does not necessarily equal a monetary return. It shouldn’t necessarily be a replacement for retirement saving and investing.
Think it is too late for you to become an entrepreneur? Think again. Most entrepreneurs worldwide are 55-64. Learn more about entrepreneurship and financial success later in life.
2. Be Willing to Relocate for Work
The downside of relocation is that you might need to move away from friends, family or an environment you really enjoy. The upside is advancement, opportunity and an adventure.
The person who said that relocation improved their financial life spent years living in Australia and New Zealand and are now actively weighing the lifestyle benefits of life in the United States vs. perks they came to love living abroad.
3. Create and Maintain a Budget
Many people mentioned budgeting as being game changing. They say that tracking spending is really interesting: “It can be surprising to actually see where your money goes and it can help you make smarter choices.” If you want to know how to take control of your finances, start with figuring out where you are spending your money!
In addition to tracking and managing spending on a monthly basis, projecting your retirement expenses throughout your 20-30 plus years in retirement is a great exercise that can help you visualize your future and come up with more reliable projections for how much savings you will need and how to manage your cash flow effectively. The NewRetirement Planner can help you go step by step through these retirement budget projections in a huge variety of categories.
4. Work Harder (Save More)
A lot of us get into our thirties, forties or fifties and realize that we haven’t saved enough. One way to get ahead later in life is simply to work a little harder. The time to coast is over for a while.
“I am an artist and fine art restorer. I got into my late fifties and panicked that I would never be able to retire. The panic was effective, in that I hustled, got more clients and found it was really fun to be able to earn more money and it has been gratifying to sock away those savings for retirement.”
Did you know that once you turn 50, you can save more in tax advantaged accounts? Learn more about catch up contributions.
5. Spend Less
The less you spend, the more you can save.
Many people mentioned that their best lifelong financial decision — one they make every single day — is to live within their means with saving for retirement being a mandatory expense.
6. Make Saving a Priority
Saving is an action you need to take, but it can be like going to the dentist, not all that pleasant and pretty easy to avoid.
Making saving a priority is definitely important.
If you want to know how to save more money but genuinely don’t know how to swing it, here are 22 tricks that make it happen. They won’t pinch. And if you start habits like these soon enough, they could make a tremendous difference in your retirement.
7. Avoid Credit Card Interest
“If we couldn’t pay for it, we didn’t buy it.”
Paying credit card interest is like throwing your money into a fire pit. It makes everything you buy on credit a lot more expensive and leaves you significantly less for saving.
Have you accumulated some debt? Here are 12 ways to reduce this expense.
8. Marry Smartly and Maintain a Healthy Relationship
Yep. Divorce is costly. And, there are actual massive financial benefits to marriage through taxes, credit scores, shared household expenses and higher household income and savings.
In fact, a still widely cited 2005 research project found that married people experience a per person net worth that is 77% over that of single people.
9. Work in the Public Sector
“I stuck with my state jobs through thick and thin: lay offs, administration changes, terrible bosses, long hours and more.” The pay off? “Retirement at 52 with a pension and healthcare for life.”
Jobs with pensions are few and far between, but the retirement benefits can be astounding. However, it is also important to note that pensions are also highly controversial in that many state and federal programs are extremely underfunded. Many pension administrators have over promised.
10. Pay Off the Mortgage Quickly
Housing is usually your biggest expense and reducing the cost can be the ultimate way to take control of your finances.
If there is any way to pay off your mortgage early, then you are left with dramatically improved cash flow that can go to savings and investments — enabling all kinds of opportunities like an early retirement.
11. Do a 15 Year Mortgage
You have choices when you borrow money for a home, including how quickly you want to pay if off. The 15 year mortgage (as opposed to the more popular 30 year mortgage) can be a great way to insure that you pay down this debt quickly.
Pros of a 15 Year Mortgage: You build equity faster, have a shorter path to full home ownership, and are burdened with a much lower outlay to interest.
Cons: The downsides to a 15 year mortgage can be significant though. You will have a higher monthly payment, will likely need to buy much less house than you can afford with a 30 year mortgage and may find you are able to save less in the short term for retirement because your cash flow is going to the mortgage.
“We sold our house as soon as the kids went to college and got rid of our mortgage, buying a less expensive house for cash.”
Buying a home is often one of the smarter decisions you will ever make — instead of paying rent, you are accumulating home equity (assuming you are paying down the principal of the loan, not just paying interest) — which is akin to forced savings.
This equity can be cashed out when you sell your home. Downsizing can release a hidden source of cash that can eliminate mortgage payments or dramatically improve your overall cash flow.
Modeling downsizing in the NewRetirement Planner can be a great way to see potential for an earlier or more solvent retirement.
13. Relocate to a Lower Cost Area
To take control of your finances, you sometimes have to make some really big moves — literally.
Sure, you can make a lot of money in certain areas of the country, but often those locales are ridiculously expensive to live in, effectively negating the extra income.
And, when you retire, getting out of an area with a high cost of living can really improve your cash flow.
14. Invest in a Rental Properties
“Our cash flow improved a lot when we started buying rental property.”
Owning rental properties can be a great source of extra income. And, the properties will typically appreciate over time, improving your overall net worth.
However, being a landlord is not without headaches: maintenance, tenant complaints and vacancies are some of the common complaints.
15. Buy Used
“There is significant savings to be had from buying things that are used. Plus it can be good for the environment and that is important to me.”
Cars are a big purchase that you can really save big by buying used. It costs less upfront and your insurance costs are lower. But, almost anything can be bought used these days.
How about not buying anything at all? The Buy Nothing Project has become a worldwide social movement. Local groups form for people to give away and try to find anything and everything for free. There is no buying or selling. No trades. Just giving away things you don’t need and finding things you want — for free.
16. Learn About Investing
One NewRetirement member mentioned that when he joined Bogleheads.org back in 2011, it “Changed my financial life. It even made me a bit better person.”
Learning about saving and investing is a worthy undertaking and and a great way to take control of your finances.
And guess what, you probably don’t even know what you don’t know. Financial literacy is really low. Fidelity asked more than 2000 people questions in eight financial categories and the average that people got right was a mere 30%. Can you do better?
Need to learn about personal finance and investing? Here are some highly recommended books about a wide range of retirement and money topics — including investing.
17. Buy and Hold
“I stayed the course with my investments when the market significantly tipped or corrected.”
There are countless stories of people who have panicked when the stock market has tanked and sold all of their investments — at a huge loss.
It takes some mental fortitude to trust that losses are only temporary, but it almost always pays off.
18. Buy in the Dips
You have heard the phrase, but do you follow the maxim? Buy low. Sell high.
It is simple, but completely solid, advice, endorsed by Warren Buffet, particularly if you are buying and holding onto those positions. Buy into the market when there is a drop in prices and hold those equities for the long haul.
However, many other experts suggest that you may be missing out if you are waiting for a dip. Buying into the market at regular intervals has been proven to outperform a wait it out and buy when things are low strategy.
19. Max Out 401k Savings for as Long as Possible
The more you can save and invest for the longest possible amount of time, the more money you will end up with.
It sounds obvious, but the magnitude of the benefits can be elusive.
Consider this analysis from CNBC: If Warren Buffet had waited until he was in his 30s to start investing and stopped at retirement age, he would have amassed mere millions instead of billions… That is a colossal difference!
The reality is that Buffet started saving and investing when he was 10 years old and is still active now in his nineties.
The longer you are in the markets, the wealthier you can become.
20. Minimized Investment Fees
Do you know what you are paying in fees associated with your retirement savings and investments? Are you aware that it can take a huge bite out of your investment returns?
“I look at the standard 4% withdrawal rate and I’m always amazed that more people don’t scream that — at a 1% fee — a full 25% of their annual withdrawal would be going to their advisor.”
21. Left the Broker in Favor of Index Funds
As you see above, fees can take a massive bite out of your investment returns. But, how are you supposed to invest without professional advice? Well, to take control of your finances, you actually do need to take control.
At least one NewRetirement member, along with Warren Buffet and many financial experts, recommends index funds as a simple, but effective and cost efficient way to invest.
When you buy an index fund, you are buying the whole market instead of an individual stock.
John Bogle, founder of Vanguard, sums up the strategy in this quote: “Don’t look for the needle in the haystack. Just buy the haystack.”
If you think successful long-term investing is about picking just the right stock, think again. Bogle’s genius was not from knowing which stock to buy, but rather about knowing that some stocks will gain and some will lose but the overall market will gain over the long term.
Bogle is the father of the index fund, an investment in an entire market, not individual sectors or companies. An index fund is the haystack. Just buy the haystack!
23. Diversified Investments
Different investment classes have different purposes. Stocks can be good for growth if you have a long time horizon. At the other end of the spectrum, a lifetime annuity is designed not for returns, but to guarantee income.
You want to diversify your money into different assets that meet your personal needs.
Exploring a bucket strategy for your money can be a good way to understand how to think about diversifying your assets.
24. Gave Generously
It may sound counterintuitive. But quite a few NewRetirement members say that the one thing that has improved their financial life was charitable giving and giving generously.
One member says, “Somehow giving has never hurt my bottom line and sometimes I even see a return in other ways, even when I’m not expecting it. In college, I gave away a full day’s wage each week and it always seemed to result in solid savings in other areas.” Another member claims that everything he has given away he has gotten back TEN fold.
Whether the dividends are financial or emotional in nature, giving is a great way improve your quality life — and someone else’s too.
25. Set Up Autopay for Bills
“I have all my utilities on auto pay to a dedicated credit card, that gets automatically paid in full every month. This way I get cashback rewards, avoid late fees and don’t have to stress over the bulk of household bills!”
Why worry about money issues when you don’t have to?
26. Automate Savings
There are many different approaches for how to save more money for retirement.
- Some people don’t think too much about saving — they just hope it happens. This type of saver might deposit their paychecks and hope that something is leftover as savings.
- Some people consciously deposit money into dedicated retirement savings accounts.
- Others automate the process and savings are deducted from their paycheck and automatically added to existing investments.
Automating your savings is proven to be the most effective way to ensure that you actually save. You don’t have to think about it, it just happens –no hassle, no excuses.
Your human resources department or your bank can help you set up an automated system. It can even be configured to increase your contributions to be in sync with any increases in your salary.
27. Started a Side Gig
Side gigs and passive income sources are great ways to boost your cash flow. From real estate investing to doing what you love for money, there are a lot of different ways to boost income.
Explore 46 different passive income and side gig ideas in 11 different categories.
28. Systematically Doing Roth Conversions
A Roth conversion is when you take money that you have in a traditional 401k or IRA account and move it into a Roth 401k or IRA. When you do this, you will need to pay taxes on the money you withdraw. However, any future gains will grow tax free.
A few members advocate doing Roth conversions. “Roth conversions make sense if you think you will be in a higher tax bracket in the future vs. the bracket you are in now. You have to look at your future projected income as well as where you think tax rates will be in the future. Our current tax rates are at close to an all time low, and they are scheduled to increase beginning 2026. Also with our huge deficits there is a very good chance they will only go up further. RMDs are not required from Roths, and Roths pass on tax free to your heirs. For all of these reasons I think its a good idea to convert just enough each year to bring you to the top of your current bracket.”
29. Discovered NewRetirement
We were really pleased when one Facebook member said that the one action he has taken that improved his financial life was that, “I found NewRetirement. It has helped me to validate my approach and is a fantastic tool to test options.”
We really think that it is important that everyone feel like they know how to take control of their finances and we provide you the tools to do that.
NewRetirement was founded with the idea that we could help people feel better about their money now and build toward a wealthier and more secure future. So glad to see that the vision of the NewRetirement Planner is coming true.