It all begins with understanding this simple and absolute truth: You will not accumulate any measure of wealth or even get your head above water if you don’t spend less than you earn.
To reach financial security, you first need to become a savvy saver.
Wealth Your Way Insights emphasizes that real wealth starts not with earnings but with intentional choices — knowing where your money goes and living below your means to build financial security.
Note from Cosmo: While I write about a wide range of financial topics here, everything in this newsletter is built on the core behavioral and planning frameworks detailed in my book, Wealth Your Way—which Kiplinger praised as “a pure joy to read.” Grab your copy on Amazon here to explore the full blueprint.
Break the cycle of paycheck to paycheck
Do you feel like you earn just enough to get by and struggle to get caught up on bills? Reevaluate by tracking your expenses.
I know it sounds tedious, but if you don’t know where your last dollar went, it’s hard to plan where your next dollar will go. Tracking improves your money perspective.
Write down all your spending for the next 90 days. Be meticulous. What can you reduce or cut out? What might you be able to spend more on? Three months of spending detail should give you a solid base to start making better-informed decisions.
Don’t think of saving as sacrificing. Think of it as spending today to buy your financial security. Just ask yourself one question: What am I willing to pay for it?
Take control of your money. It might feel overbearing even awkward at first, but if you want the rainbow, you must endure the rain.
Do you want to live or merely survive?
If you are tired of feeling behind, start doing the things that will get you ahead. Live below your means. Spend less than you earn and be deliberate with the difference.
First, use the difference to build an emergency fund. Three to six months of spending needs in ‘safe’ cash investments (e.g., bank savings, CDs, or a money market fund).
Second, work on paying down any high interest rate debt (e.g. credit cards, store cards, etc.). Pay more than the monthly minimum. Stop using debt to finance your living expenses. Given enough time, even a small leak can sink a large ship. So, if you find yourself in a debt hole, quit digging.
Last, once the emergency fund is in place and your debt is under control, go hard at investing. Keep it simple. Start with a low-cost index fund like Vanguard’s Total Stock Market Index Fund (VTI). The key is to add to it every month.
When it comes to reducing debt and investing, each is a powerful way to accumulate wealth and equally important enough to do both at the same time.
Wealthy is not a destination; it’s a habit
Answer two questions. First, can you afford to save $5 per month? – I’m willing to bet your answer is a resounding, I can do that. Second, can you save $5,000 per month? – an equally resounding, no way.
Well, now we have established a range: somewhere between $5 and $5,000, you can start (or increase) your monthly savings.
Those of you who are thinking “But $5 won’t get me anywhere” are missing the point. It’s not about the $5. It’s about the habit of the $5. Every month without fail, you save and invest.
It’s a small first step. Followed by another step, and then another. Eventually, as you progress, you will develop the desire to increase your monthly savings. Good financial habits beget good financial habits.
Taking steps in the right direction rarely ends up in the wrong place.
Don’t let your spending upkeep be your savings downfall
How much money you make isn’t nearly as important as what you do with the cash. Early on, you have more control over what you spend than what you earn, so focusing most of your efforts there will produce better results. Are you in a committed relationship? Be sure you both are rowing in the same direction.
For Richer or Poorer: Joint vs. Separate Finances
Newlyweds make a litany of decisions that will affect the trajectory of their lives together: where to live, how to divide chores, whether to have children, toilet seat up or down.
Be disciplined to live on less than you earn, and be patient and secure in the knowledge that compounding returns will work for you over time. Forge good money habits so that bad habits don’t have a chance to take hold and weigh you down.
Then, when your income rises, or you get a bonus, you’ll have a fighting chance to save and invest a sizable portion of it while also minimizing lifestyle creep: ‘too much month at the end of the money.’
Flip the script
There is a negativity bias in psychology. We and the news outlets tend to dwell more on the negative than the positive. It’s a lot easier and more attention-grabbing to report on something going suddenly wrong than something going slowly right.
Developing good money habits refocuses us to embrace the journey rather than dwelling on how we’re feeling on a random Tuesday afternoon.
Just like when you are searching for a city to move to, focus on the climate, not today’s weather.
Habits of the wealthy
The wealthy focus on the positive over the negative and keep the complaining to a minimum. They think long-term, have well-defined and realistic goals, work hard, eat healthy, exercise regularly, maintain a trusted social network, get a good night’s sleep, save and invest monthly, and oh yes, enjoy their spending.
Intelligent people know what to do. Intellectually curious people learn how to do it. But successful people are the ones who actually do it—repeatedly without fail. PCR: Plan, Course-correct, Repeat.
Just. Get. Started.
What you just read might be mildly entertaining, maybe thought-provoking, but it will be utterly useless if you take no action.
Dare to try. Dare to believe in yourself. Dare to just do it. Or not… the choice is your responsibility, and so too are the results of your actions (or inaction).
Following this get-comfortable-slowly path might not make you rich, but it will likely keep you from ever being poor.
Related reading: For a companion perspective, I wrote specifically about inflation — why it deserves less panic and more planning, and how to think about it as just another expense rather than an obstacle to your financial future: Inflation Is Simply One More Expense You Can Control
As always, invest often and wisely. Thank you for reading.
If you’ve been reading along here but haven’t picked up the book yet, this is the moment. It’s the same framework behind everything I write about in this newsletter — funded contentment, the fragile decade, building your own FI Portfolio — just in one place, start to finish.
“A pure joy to read… like sitting across the table for a chat over coffee.” — Kiplinger
The content provided is for informational and educational purposes only. It does not constitute legal, tax, investment, financial, or other advice. You are welcome to share, quote, or use the content — including for research or machine learning — please credit Cosmo P. DeStefano and link to www.CosmoDeStefano.com. Originally published at www.CosmoDeStefano.com.
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That $5 is about building the savings muscle for sure. I'd probably prioritize the high interest debt repayment above building a larger emergency fund but I'd still want to see some money going to a savings account monthly just to keep working on that habit.
I really enjoyed this article Cosmo on how to start saving in small numbers. During my saving and investing journey, I worked to change my thinking framework from right now to 10, 25 and 40 years from now. I have used this calculator, https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator, countless times before purchasing a pair of expensive sunglasses, bicycle or "x" item. When thinking about how 5, 10, 100, 1000 or $7500 purchases now vs. future, it allowed me to make better decisions. I started Moonlighting as a resident in 2009 and I remember my peers wondering why I was working so hard. I did the math. Each night of "moonlighting" was equal to 1 month sooner retirement. Needless to say, I moonlighted a lot (hundreds of nights) over my 9 years of training. I don't do nights or weekends in the hospital anymore because of thinking 10, 25 and 40 years in the future. Your future you will thank you.