WHEN it comes to habits, breaking the bad ones is just as important as establishing the good ones.
If you want to build your wealth in 2020, start by eliminating these five costly habits.
Putting off saving for retirement
Retirement might seem so far away, but the longer you wait to start investing, the harder it will be to catch up down the line.
One of the simplest ways to get started is to fund your employer-sponsored 401(k) plan. If your company doesn’t offer one, or you’re self-employed, consider other options, like contributing to a traditional or Roth IRA.
Ideally, you’ll want to work your way up to saving at least 10% of your pretax income. But if you can’t afford that much, just start with 1% and gradually increase your contributions as you can.
Paying just the minimum on your credit card balance
Most credit cards only require you to make a minimum payment each month, which is typically a fixed amount, often $25 to $30, or a percentage of your balance, usually 1-3%. Paying the minimum is tempting, especially if your budget is tight. But the less you pay now, the more you’ll pay later.
Carrying a credit card balance not only means you’ll be in debt longer, but it also means you can rack up massive amounts of interest charges, thanks to often exorbitant interest rates.
In 2020, get in the habit of making payments in full if it’s at all possible. The easiest way to do that? Set up autopay, so you don’t need to worry about remembering to pay your bill each month.
Spending as much as you earn, or more
If you’re spending as much as you’re earning — or more — you’re living paycheck-to-paycheck, which can easily spiral into credit card debt. That lifestyle makes it nearly impossible to build up significant savings.
The solution: Try to live below your means — not at or beyond them. You can start off the year by looking at your credit card’s year-end-review statement and identify areas where you can cut back your spending.
Going without a specific goal
If you want to save or earn more, you need to have a clear goal and then set a specific plan in order to achieve it.
Start by determining exactly what money goals you want to accomplish in 2020. Do you want to beef up your emergency fund? Do you want to save for a down payment? Do you want to invest more? Do you want to earn more?
If your goal is savings- specific, figure out how much you’d have to save per month or per paycheck over the course of the year to get there. Then, set up a recurring automatic transfer from your bank account to your savings account to ensure you’ll stay consistent with your savings.
If your goal is more abstract, such as increasing your salary, come up with an action plan and write it down. Earning more could mean negotiating a raise, starting a side hustle or a combination of the two.
Waiting until you have more money to invest
Time is on your side when it comes to investing, thanks to the power of compound interest. And you don’t need to earn a massive paycheck to start putting your money to work.
There are apps that aim to make investing simple and accessible, and you can look into automated investing services known as robo-advisors. Many experts, including Warren Buffett and Mark Cuban, recommend investing in index funds.
The key takeaway: Don’t wait. Even if you can’t invest a ton of money, establish the habit of setting aside at least a little bit each month. Whenever you get a pay bump or bonus, reevaluate how much money you can realistically set aside.