8 Middle-Class Habits That Quietly Build Wealth Without Sacrifice
Written by
G. Brian Davis
Edited by
Amen Oyiboke
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Most consumers think they have to choose between saving money and living the life they want to live.
Savvier middle-class households know they can have their cake and eat it too — if they’re smart about it. Try these eight habits that help you quietly build wealth without sacrifice.
Save Half of All Raises and Windfalls
Lifestyle inflation is a silent killer of wealth. Too many people immediately find ways to spend more, the moment they start earning more.
“Every time you get a raise, put half towards savings and the other half toward your monthly budget,” said Kevin Estes, financial planner at Scaled Finance. “It doesn’t feel like a sacrifice because your take-home pay rises despite saving more.”
Do the same with one-time windfalls to “treat yourself” while still building wealth.
Automate Savings
Don’t rely on willpower to do the right thing. Sooner or later, it will fail you.
Instead, Finance Professor Robert Johnson at Creighton University urges workers to automate their savings so it’s out of sight and out of mind. “Avoid the decision to spend versus save money by having some of each paycheck deposit directly into a savings account or brokerage account.” If your employer can’t split your direct deposit, schedule automated transfers to take place the day after each paycheck.
You can also try automated savings debit cards, which round up to the nearest dollar and automatically save the difference.
Automate Investments
You don’t have to manually buy each investment either. Robo-advisors can automatically invest all cash in your brokerage account based on your target asset allocation.
For that matter, they can also automate those transfers from your checking account to your brokerage account.
Automate Bill Payments
Schedule your bills to automatically debit you on the day after you receive your direct deposit paycheck. That way, the money doesn’t linger in your checking account, tempting you to spend it.
Avoid Consumer Debt
If you use a credit card, likewise schedule automatic payments to take place right after your payday. Don’t carry a balance from one month to the next, and don’t use buy-now-pay-later services at all. They only add to the temptation to overspend.
Sift Out Underused Subscriptions
Most households have dozens of subscriptions nowadays — and don’t even realize it. Hunt through your credit card statements for monthly or annual subscription charges, then relentlessly cut out every one that doesn’t make you significantly happier.
For each subscription you cut, add the equivalent amount to your automated savings. Easy peasy.
Consolidate Old 401(k)s
A study by Capitalize found that Americans have forgotten 31.9 million 401(k) accounts with old employers. With $2.1 trillion sitting in them, abandoned.
Take half an hour to look up your old 401(k)s and roll them over into your IRA. Moving forward, never leave a job without first rolling over your retirement account.
Add Friction to Spending
Start by deleting every saved credit card from all your online shopping accounts.
Then implement a simple rule: every discretionary purchase requires a 24-hour probation period in the shopping cart for you to think about it. If you still really, really want it a day later, you can buy it. But this simple habit helps prevent impulse purchases.
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