July 18, 2019 • Accomplishing Goals • Working in the Trades
Financial Advice For Blue-Collar Workers
How to become a millionaire, fix your credit, and spend your money wisely
What’s the best way to become a millionaire? Listen up Gen Z because the best piece of financial advice is to get started early.
Despite what you may have been told, with the right financial plan you can become financially secure with basically any job. In fact, I know plenty of blue-collar millionaires and I have 19 year-olds in my office who are already on their way.
How? They have millionaire mindsets. They are already contributing to their retirement plans and are committed to investing $60 a week. With compound interest they’ll all be millionaires before they retire. Even more importantly, at 19 their retirement is already taken care of!
You may not be 19 anymore but there’s still plenty you can do to meet your financial goals. Just six tips will empower you financially and help you find comfort, peace, and freedom.
1. Use The Power of Compounding Interest
Just how powerful is compound interest? The first $60 invested by those 19 year olds will grow to over $4,800 by the time they are 65 given the stock market average historic return of 10%. Now imagine the cumulative growth of the $3,000 they invest in their first year… and every year after that.
The idea is also excellently modeled by Dave Ramsey in his Arthur and Ben example of investment, which shows that money invested earlier can be worth more than four times that amount invested later.
2. Establish Credit
Establishing credit is another essential step in building financial health. Credit scores are a judgement on our ability to pay back borrowed money. How can you build credit? Get your first credit card – think about the purchases you make anyway and use your credit card only for those purchases.
One of the cleanest ways to establish credit (whether you’re looking for yourself or to help your kid establish credit) is to pay off your credit card on a nearly daily basis. Why? It’ll keep you on the strait and narrow and make sure that you’re not spending more than you can afford.
Look into a monitoring service like Credit Karma, which can show your scores for free. 700+ here we come!
3. Fix Bad Credit
What if you’ve already made a couple missteps with your credit?
You’ll need some time and, more importantly, discipline. Live within the financial means you already have or find a better paying job. In addition, you may need to start paying off more of your debt. Start with your highest interest credit card first and then move onto the next highest card.
4. Spend Your Raise On Yourself
How should you spend your raise? Let’s talk about what typically happens when people receive raises. They spend a few more dollars here and there on material things and all of a sudden their extra money is gone and it hasn’t really made them any better off. How should you spend your raise? Put that money to work for you, invest it and start building your Comfort, Peace, and Freedom.
This may mean putting your raise into your retirement accounts. It may mean paying to learn a highly-valuable new skill. What it has to do is increase your comfort, peace, or freedom. This type of purchase will always be based on individual needs and values but the new $300 jacket you’ve been eyeing that you think will turn heads probably doesn’t count.
Instead, think of this example: For some people, replacing their junker that breaks down every thirty minutes on their way to work with a new car will increase what they are paying each month, but they are afforded an enormous amount of freedom because of the purchase. They know they’ll get to work on time, they know their kids will be safe in the car, and they know they can take that weekend road trip they’ve been thinking about.
5. Find Savings On A Tight Budget
While many people start with advice on ways to cut spending (and I support that), my advice is a bit different. If you want to save more there’s another possibility: Earn more. Find out what else you can do at your current job or start looking around for better opportunities. Whenever one of my workers comes to ask if there’s more they can do I make it work. Why? That’s someone I want to keep around.
There’s also never been a better time to be a blue-collar worker. Opportunities are plentiful and given the supply and demand, it’s likely you could find more money if you look around.
Once you’ve given that some time you can dig into your budget. I find one of the best ways to find savings is to compare budgets. When you start to look at how other people spend money you might find that your car payments or food expenditures are unnecessarily large. For example, here’s what The Balance recommends for budget percentages:
- Housing: 25-35%
- Insurance (including health, medical, auto, and life): 10-20%
- Food: 10-15%
- Transportation: 10-15%
- Utilities: 5-10%
- Savings: 10-15%
- Fun (entertainment and recreation): 5-10%
- Clothing: 5%
- Personal: 5-10%
6. Really Think About Spending
We’re all guilty of a rash expenditure every now and then. My guilty pleasure – new golf shirts. It seems like every time I take a trip I buy a new golf shirt and when I get home I realize I didn’t need it. That’s because malls and stores employ geniuses to separate you from your money.
Beating them doesn’t mean hoarding every penny. You should go out and enjoy the fruits of your labor, just make sure it fits your end goal. My way to slow down purchases? Ask yourself “What if I wanted this and they didn’t have my size?” Often I’ll find out that I wouldn’t be that disappointed, in fact, I’m sometimes relieved to not be spending the money. Another way to do it is to think about that item sitting unused in your closet. When you take a pause you beat all the marketers who are counting on you to make impulse purchases.
Another great tool is to put your money into retirement accounts (which penalize withdrawals) or put it into an account which is much harder to access. When you have to work to make a purchase you find yourself spending much less frivolously
Sound simple? The ideas are but execution can sometimes be difficult. Here’s what I would do today: open an investment account that you can divert extra money into, come up with a plan on how to ask your boss for more hours if your budget is tight, and examine your credit score.
One more piece of advice, subscribe to my email newsletter where I periodically update my followers on building their comfort, peace, and freedom.