Lots of people think that to be better off financially they need to get a big raise at work or win the lottery. However, while those events would be nice if they happened, they’re certainly not necessary to improve your situation with money.
There are plenty of small changes a person can make to their spending and savings habits that will compound into giant steps forward. All you have to do is recognize that these chances exist and start taking advantage of them.
The following are seven such financial opportunities that will help improve your budget and fiscal well-being.
1) Retirement Accounts
Contributing to a retirement account like a 401(k) or IRA is one of the best things you can do to grow your net worth. This is for several important reasons:
- Investing – Unless you’re already actively buying stocks, ETFs, or mutual funds on your own, then you’re not taking advantage of the power of compound growth. Compound growth is the cyclical process of earning money on top of both your contributions and any previous earnings you’ve already accumulated. Because retirement accounts are focused on funds that grow with the market, you’ll be systematically investing and capitalizing off of them year after year.
- Taxes – The thing that separates 401(k)s and IRAs from other types of investment accounts are the tax benefits they offer. Traditional accounts allow you to take a tax deduction against your contributions while Roth-style accounts let you make future withdrawals tax-free. With both types, the money that’s inside doesn’t incur any taxes for as long as it stays inside the account.
- Employer Matching – When it comes to 401(k)s if you’ve got an employer that’s offering to make matching contributions, then you’ll absolutely want to do this. Matching contributions are basically free money that you can use to grow your nest egg even further. It’s an easy way to potentially double your savings rate without any extra sacrifice on your part.
If you don’t have a retirement account, then begin by talking to the HR rep at your employer to see what they offer. If they don’t have one, then you always have the option to start an IRA with any brokerage or bank that offers them.
2) Flexible Spending Accounts
Another little-known but highly valuable employer benefit is flexible spending accounts or FSAs. These are special holding accounts where you make tax-free contributions to a tax-advantaged savings account and then reimburse yourself later on for specific expenses such as:
- Health care – Up to $3,050
- Dependent care – Up to $5,000 per household or $2,500 if married, filing separately.
Similar to a retirement account, the fact that you get to skip out on paying taxes means that you’ll probably save between 22 and 24 cents per dollar (depending on which tax bracket you’re in). Again, speak to the HR department at your employer to find out if they offer one.
3) High-Yield Savings Accounts
Whether you’ve got more money than you need in your checking account or the start of an emergency fund, a good place to hold these funds is in a high-yield savings account. Many of these types of accounts are available online only and are currently paying between 4 and 5 percent (thanks to the Fed raising interest rates since 2022).
A good way to start funding these accounts is to look for wasteful spending in your day-to-day purchases. A budgeting app like Buxfer can help you do this by connecting to your credit cards and bank accounts and organizing your transactions. That way, you’ll be able to tell across multiple accounts where some improvements could be made.
Though it’s not a ton of extra cash, the interest that these accounts are paying is an easy way to make between a few hundred or even a thousand extra dollars per year. That definitely beats a standard checking account which basically pays you nothing.
4) Bonds
If you’ve got money that you’ve been sitting aside for a large purchase (such as an upcoming home purchase or special event) and you don’t want to risk investing it in the stock market, then bonds might be a good a park your money. Not only are they considered to be a much safer alternative, but many bonds are currently paying generous returns due to the federal funds rate currently being so high.
Although it’s possible to buy bonds directly from the government, a better alternative may be to buy an ETF or mutual fund that tracks them. This will give you better liquidity and exposure to the broader debt market.
5) Dividend Paying Stocks and ETFs
If you’d like to hold assets that pay you quarterly, then something you may want to purchase are shares of high-yield dividend stocks and ETFs. These are companies or funds that are well known for paying shareholders generous distributions.
To get you started, look to reputable media outlets for curated lists like this. However, be aware that stocks and ETFs can lose value, so be prepared for some potential losses in case the market heads south.
6) Real Estate
Owning a home has a lot of financial opportunity over renting. Not only will you most likely be able to sell your house for more than what you paid, but you’ll also build equity in your home with each mortgage payment. That’s because a portion of each check you write to the lender goes towards lowering the principal on the house. Simply put, the larger the share you own, the more you get to keep when you move someday.
If you’re not in the market for a home but would still like to capitalize on real estate, then you may want to consider buying REITs (real estate investment trusts). These are securities that are similar to stocks which represent ownership of a company that owns and operates commercial real estate such as office buildings and hotels. REITs are also nice to have because they pay relatively high dividends to their shareholders.
7) Education and Skill Development
Finally, one of the best financial opportunities you can take advantage of is in you! Specially, in developing marketable skills.
For example, are there any advanced degrees or certifications that you could earn that would lead to a job promotion or career move? What about working on soft skills such as becoming a good leader, respected manager, or persuasive salesperson?
The great thing about investing in your education and skills is that these are qualities that you’ll be able to use no matter where you go or choose to work. Therefore, they’re yours to keep and use in the most productive way possible.
There are opportunities such as these all already us every day. However, no one ever taps you on the shoulder and points them out. You have to learn how to recognize them on your own and have the courage to act.
For that reason, make a habit of identifying as many of these chances as you can. Start by following the ones we’ve listed above, and work towards making your financial situation a little better each day.
Featured image credit: Pexels
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