4 Small Habits Make People Feel More Financially Secure Than a Big Salary Does
According to a Northwest Mutual study, household income and finances are the biggest factors contributing to Americans’ sense of personal prosperity. But this doesn’t just come down to having a high salary or net worth. Those who have a financial advisor, investments and insurance tend to feel more prosperous than their peers.
But what can you do to feel more financially secure if you can’t necessarily invest or afford an advisor right now, but your salary also isn’t very high? Here are a few seemingly small habits financial advisors suggest.
Read More: Suze Orman's 5 Steps To Take Control of Your Money
Check Out: Start Growing Your Net Worth With Smarter Tracking
Save Consistently for Emergencies
Around a quarter of Americans live paycheck to paycheck, according to the Bank of America Institute. When you’re earning less money, you’re also more likely to fall into that category. But if you want to feel more financially secure, it’s important that you find ways to save where you can.
“The main small habits that make people feel secure are having savings and reserves of over six to 12 months of expenses,” said Farrel Liger, wealth advisor and CEO of Farrel Liger, Inc. “It’s comforting knowing that if something goes wrong, whether it’s a job loss or an unexpected life event, you’re not immediately facing a financial crisis.”
If your income is lower than you’d like it to be, those small savings add up even faster in terms of emotional and financial security.
Start Investing (Even If Small)
Once you have even a small emergency fund, investing is often the next logical step in building financial security.
“We accomplish what we prioritize,” said Robert R. Johnson, PhD, professor of finance at Heider College of Business, Creighton University. “Prioritize savings and invest those savings.”
If you’re working, start prioritizing your retirement plan contributions. If you have a 401(k) account, you can contribute up to $24,500 this year, per the IRS. Making these contributions automatic so they come directly from your paycheck can help keep you on track and boost your sense of financial security.
Having other investments doesn’t hurt, so long as they fit into your plan and aren’t causing you undue stress now. Just be sure to choose ones that match your risk tolerance and time horizon.
Resist Comparing Yourself With Others
No matter how tempting it is, try not to compare yourself with others, especially when it comes to finances. Your situation is your own.
Besides, just because someone else might seem like they’re doing better doesn’t mean they are. A Credit One Bank report supports this. According to it, 54% of Gen Z lies or exaggerates about their financial success to impress others.
You can still compare, just in a healthy way that motivates you.
"While a certain amount of comparison to others is only human, it can erode financial security when money is wasted status signaling, ‘keeping up with the Joneses,’ moving goalposts, or spending in a way inconsistent with your income and budget, just because everyone else seems to be doing it,” said Wendy Molyneux, certified financial education instructor (CFEI®) and founder of Whole Person Finance.
Live on Less Than What You Make
When you live on less than what you make, you’re not just creating room in your budget for saving or investing. You’re also inherently building financial security, one step at a time.
“A raise or bonus feels great, but if it immediately turns into a bigger mortgage or a new car payment, or more fixed expenses, you may not feel any better off,” said Steve Sexton, CEO of Sexton Advisory Group. “Sometimes the smartest thing you can do [with] more income is not spend all of it.”
As your income increases over time, save or invest more of it than you were before. If you have debt or a small emergency fund, prioritizing those can also help you build financial security.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
More From MoneyLion: