The 10 Best Money Moves You Can Make

If you'd like to learn more about how to grow your net worth, you can subscribe to Free Money Finance's RSS feed for free by clicking this link.

I've been pondering (Yes, I used "pondering". I am, after all, getting older) what the 10 best money moves are, so I thought I'd take a stab at listing what I think are the top ten, then have everyone comment on them and adjust as needed. Note that these aren't listed in sequential order (which you would do first, second, etc.), but rather listed in order of importance (which has the biggest impact on your net worth).

Before we begin, I'd like to start with some perspective. There are plenty of things worth more than money (like your health, time, your mind, and your kids). So while this is an important list, there are things in life much more important. (Just adding some perspective there.) :-)

Now, here's my top money moves list:

1. Spend less than you earn. This alone is THE key to getting rich. Said another way, save a portion of all you make (To spend less than you earn, you may need to earn more or spend less.) By the way, doing this is the way to become the richest man in Babylon. ;-)

The keys to spending less than you earn are to create and review a financial plan including establishing a spending plan. There are three ways to track your spending. I prefer to use Quicken or Microsoft Money -- or a great budgeting alternative.

2. Increase your income. The best way to do this is to make the most of your career -- your most valuable financial asset -- which will offer you many financial benefits. You can make the most of it by getting a college degree and managing your career to its full potential. Doing this well can earn you millions of dollars in extra income throughout your lifetime. Then, look for additional ways to increase your income (and who knows, you might find a new business somewhere in here.)

3. Contribute to your 401k to get the full employer match. It's a no-brainer investment where you earn 50-100% return automatically (depending on your employer's plan/match). Where else can you get such a great return? (By the way, not doing this is one of the nastiest money habits I can think of.)

4. Get out of credit card debt. It's a great way to earn a 20% return on your money -- and relatively easy to do if you've done steps 1-3 already and have a bit of discipline.

5. Buy a house. Generally, homeowners get rich and renters stay poor -- and buying a house can make a big (positive) difference in your net worth. The key to making the most of this step financially is to follow a proven, successful formula for buying a house. Doing so will even protect you financially from the real estate cool down we're experiencing in the U.S. Better yet, once you buy a home, take some simple steps to increase its value.

6. Invest your savings regularly in good, solid investments. I like index funds. Do this for a long time, letting the power of time and compounding work for you. Simply doing this can make you rich. According to Smart Money magazine, simply putting money away into savings and then investing that money will net you over $1 million in 10 years (I think that's a bit high, but even if it's a quarter of that amount, it's a big number!)

7. Pay off all debt. You won't get as good a return on this debt as you will on your credit card debt, but you will get a guaranteed return (paying off a 9% loan is the same as earning a guaranteed 9% -- after taxes -- on an investment). Not bad. If you're diligent and have done enough of the preceding steps, you can pay off much of your debt in a year or less.

8. Save for retirement -- above and beyond the employer match to your 401k. I recommend the following saving steps: 1) save to get the full employer 401k match, 2) invest in a Roth IRA, then 3) max out your 401k. If you do this early and often, you can retire wealthy.

9. Protect what you have. This means obtaining adequate insurance and developing an estate plan (including writing a good will that works for you and names a guardian for your children).

10. Give. I know this might seem like a strange item to put on this list, but there's a power in giving that unlocks financial blessing in your life. And it's not that "wealthy people tend to give" but it's often that "giving people become wealthy." Easiest way to give? Put it into your budget just like any other "expense."

So, that's my list -- what do you think? Did I miss anything? Or mis-order what I did include?

Comments

[annab]

Not to be afraid to educate yourself about money. There's so much info out there! :)

[Mary]

Indeed, the tenth one is strange. It is so because there is nothing sure in it and finance is based on something solid.

[Rob]

Although some may disagree - buying a car instead of leasing. Leasing is a trap that makes you feel rich since you can get a lot of car for a little money - it's akin to paying rent for the rest of your life.

[William Tanksley]

May I suggest a missing item: "be prepared for the unexpected." This means have an emergency fund. Even before you pay off debt, you should have SOMETHING available in case (when) something unexpected happens.

[King of Debt]

I agree with you on #10. Giving just makes you feel better overall.

[Jersey Girl]

#10 is a great one. I agree that it feels good and ends up coming back in the end.

[Caryn]

Wow. I feel better after reading your list because I'm pleased to announce that my husband and I are doing all of the above. Sure, we could be doing better in many of the areas, but what we have is better than nothing, and we're working hard to improve.

[Mallory]

I've actually found that most of the financial books and advice I've read tend to mention something akin to #10. The One Minute Millionaire particularly talks about this concept. I totally believe it to be true and vastly important.

[George]

Excellent list. I also like the addition of number 11: "be prepared for the unexpected" by Rob.

I find myself having to pay unexpected expenses every year.

[Shadows Edge]

I'm doing most of these, though I just recently started some of them. In about 2 months I'll have all my credit cards paid off!

#10 is a good point - as the saying goes "What goes around comes around." By giving money away, you make room for more of it to come your way.

[Steve]

Instead of adding more to your 401k after taking advantage of your employer match, it makes more sense to put that extra contribution into a Roth IRA. A Roth IRA will grow tax free and in the end leave you with more money than a 401k which will all be taxed at your income tax rate. With capital gains and dividends being taxed at 15% there is even an argument that a taxable, non-retirement account, would be more beneficial than a tax-defferred plan if your retirement tax rate will be over 15%.

[FMF]

Steve --

I think that's what I said. See #8.

[Steve]

I just felt an explanation of the tax benefits of the Roth would make some sense to make your point. Also a 401k may not be the best choice in our current tax environment if your expected income tax rate at retirement is over 15% which is likely if they do a good job saving, considering the requirments to start withdrawing your money at 70 1/2. In a non-retirment account you wouldn't be required to withdraw the money and can have more control over your tax situation expecially in conjunction with a well-funded Roth IRA. Having three "pots of money" are a key.

[Scott]

I would like to give a differing opinion on 401k. I have been able to max out my 401k for most of my career. On looking back I think I would have only invested the minimum to get the employer match and put the rest in a taxable account. I have been able to become semi retired at the age of 39 by investing mostly in real estate. The money that I have put in my 401k would have been put to much better use by investing in more real estate.

Dont forget about your 10% every sunday!

[wmc]

Great list! And don't get a payday loan!

[Kurt]

Good stuff here. The comment above about the payday loan is definitely worth repeating. In fact, a good addendum to the list would read something like "Watch out for horrible financial traps and costly mistakes." Payday loans, store charge cards, late fees, etc. These types of mistakes can erase all the benefit of a whole years worth of interest from your savings account and then some. There are a lot of shady businesses out there, most of them perfectly legal, that are more than happy to rip you off.

[pj]

A great list. It reads a lot like "The wealthy Barber," which is my favorite financial book besides The richest Man in Babylon.

[newreader]

How would you modify this for someone who is disabled (unable to work at all) and who makes nothing more than a small disability benefit each month and cannot increase their income from working in any way?

If someone in such a situation spends on the necessaties only: health insurance, medicine, food, doctors, etc. and still doesn't have enough because of the low disability pay and high costs of healthcare, what would you suggest they do? Especially if they're still very young when they become disabled and haven't had the opportunity to begin saving or getting ahead?

I would love to hear any tips on this topic that you may have. Thanks a lot.

[FMF]

Newreader --

That's a tough one -- and an issue I don't know a lot about. I'd suggest looking for a blog writtent by someone who's disabled (or knows the issues associated with being disabled) and see what they have to say.

[truthbetold]

All of the ten points sound great but they are for the elite in America. The majority of people are living from pay check to paycheck or handout to handout(pension, welfare check, SS check-retirement or disability). Most Americans have no idea how to get more money for necessities even though the means to do that is right under their noses. It is better to sell what is in the house or apartment than to lose the house or the apartment and have to live with people who don't want to share their space.
Go on a treasure hunt in your living quarters, even disabled people can do that for the most part. Watch the Antiques Road Show, Find, Cash in the Attic and the other shows. Get the Kovel's newsletter and study to cash in on money.

[Tony]

It's difficult to listen to all of this, especially for me, who thought I was successful. I am 32, used to have a good savings, but after it didn't work in past relationships, I am paying just over $1700/month in child support, while grossing $2500/month ($67k year with a degree in engineering) and trying to sell my house to get rid of a $930/month mortgage + utilities - now living with my parents, also paying about $700/month in credit card debit ($35,000 accumulated so far). I am paying mortgage and bills on my credit card because it won't sell and no matter how much I make, the gov't takes it to give my 2 kids mom a life of luxuries. Besides suicide, does anyone know of a way out - no plan of mine will work!!!

[FMF]

Tony --

Find someone you know and trust and who's good with money. Sit down with them, go through your finances, and seek their counsel.

If you don't know anyone like this, find a church in your area that has a "financial counseling ministry" (many of the larger ones do.) Meet with the contact they give you and apply what he/she says.

There is hope. I've seen people in MUCH worse financial difficulty than you turn around their financial lives. It will take some time and require some sacrifices, but it can certainly be done.

i like number 5.especially adding value to property etc.easiest way to make more money!invest invest invest!

[gurasz]

i like number 5.especially adding value to property etc.easiest way to make more money!invest invest invest!

[Raghu]

Don't worry too much on spending small amounts, but focus on saving on bigger expenses?

[Pete]

I agree with #8... saving for retirement is key. I know it will be beneficial in the upcoming years. This list is a great reference.