You're tuned in to the MBIT podcast led by Seamus Madan, Economic, and financial topics broken down. Educating you on your financial journey. Welcome everyone to the MBIT podcast. This week, we'll be discussing some strategies to build wealth efficiently and effectively to hit the 1,000,000 mark. Now as you embark on your journey to make your 1st 1,000,000, is important to keep in mind that it is a marathon not a sprint.
Along the way, there will be hills and mountains to challenge your ability, but remember that the best rewards are in the journey and to continue persisting. Now quick disclaimer before we begin is essential note that this is not financial advice. In all opinions expressed are my own. Alright. Let's get to the 10 tips. Alright. The first one, number 1, analyze. To make progress, you first have to determine where you can improve.
For example, a good first thing to do is to analyze your credit statements, debt, bills, spending, etcetera. From there, you can focus on certain areas to improve, like work towards paying off a high interest rate debt or not spending $4 on a cup of coffee at Starbucks, Key takeaway here is to observe your lifestyle and determine areas where you could be saving. And that brings us to our second tip, save.
No matter who you are, there's always somewhere you could be saving that you just didn't recognize before. For example, buying in bulk for repeat purchases like paper towels, water, tissue paper, and etcetera. And Costco is a fantastic example of this. Which you could easily be saving 100 of dollars per year just by buying in bulk. A big one would also be saving 40% of your paycheck or as much as you can while still being able to pay expenses and have some cushion for emergencies.
By taking this step, you would be investing in your future. And the key takeaway here is the less money you are spending every year, the more you can put away for the future, and that brings us to our 3rd tip investing. So You begin accumulating savings, but what should you do with it to maximize your return? Well, first, it is important that you have a designated amount saved away to at least cover your expenses for a few months for the worst case scenario.
With the rest, believe it or not, your money is losing value just by staying in your bank account. Most banks in the United States, especially recently, offer a very low less than 1% API. And API is the amount your bank gives you back for saving with them. With the rate this low, it can't even fight inflation, which is normally around 2% although recently as high as 4%. Alright. So here's my point. Invest what you can.
Before I continue, it is important to note that investing is risky, so only risk what you are willing to lose. Investing in an index fund like the S and P 500 provides you with some diversification in your portfolio and as history shows a decent return on your investment in the long run. Not only do you have better chances of return on your investment, but also many stocks pay dividends. Now what are dividends?
They're when a public company pays investors part of earnings for holding their stock. This occurs four times a year when public companies announced their earnings describing how their company has been doing financially for a certain period of time. For example, I've hold pace around 22¢ a share. And although that might not seem like a lot, it certainly adds up the more shares you owe. And that brings us to our 4th point, diversify.
Okay. So we touched on diversification a little in the last point, but to sum it up, it is important to diversify your assets to decrease your risk when investing. Like the saying, don't put all your eggs in one basket. That way if one sector of your Folio does not perform well, like, tech, then hopefully your other sectors can balance it out.
Although over diversifying, like, investing in 100 or 1000 of individual stocks can become risky as it is no longer possible to keep tabs on all your investments. And at that point, you're no longer focusing on what you know. Key takeaway here is diversifying your portfolio reduces your risk. Number 5, credit. So another thing that can be easily overlooked is your credit card. Use it wisely. First, pick a card that best fits your needs.
Look out for tricks like high interest rate, annual fees, and etcetera. 2nd, avoid maxing out your card and keeping it below the 30% limit. If your credit balance is high, that could affect your ability to take out a loan or even be hired for a job. Finally, continue paying off your card and not to take on too much debt. Key takeaway here is your credit card is convenient, yet powerful. Number 6, lifestyle. In your credit card bills, give a hint into your lifestyle and spending.
Now this is definitely one of the most important points on this list. Because even if you do everything else right, this factor could set you back farther in your journey. It is proven that a person with a lower income was a less demanding lifestyle, key takeaway here is to cut any expenses out that you don't need. And, be conscientious.
Number 7, max out employer 401 k. Now there's a tip in here that many do not know about and don't normally take advantage of possibly list missing out on tens of 1000 of dollars, if not more. So open to 401 k sooner rather than later. We're gonna have a quick example here. So let's say you decide to open a 401 k at 35 instead of in your twenties. And you invest 20% of your income. And we're gonna have the assumption that the average annual household income is 80 $1000. Now stay with me here.
I'm not gonna make you guys do any math, but this is important. So then by 65, you would have $522,000. However, if you started at 21, you would have around $765,000, almost a quarter 1,000,000 more just by starting earlier. Now that is with out the hidden trick that many employers offer. Some offer a 401 k match up to a certain amount monthly. Now what that means is your employer will match the amount you add to your 401 k up to around 4.6% of your salary.
Assuming you started contributing at 21, you would have an additional $176,000, which would bring your total 401 k balance to around the million mark already. Alright. These last couple are gonna be quick, but I'm gonna give them to you anyway. Number 8, negotiate. You always have to negotiate. Negotiating is a key skill in life. If you always take something when not negotiating, you'll be missing out on 100 1000 or 100 of 1000 of dollars.
Whatever someone's selling, they're normally always willing to sell a little bit lower. So anytime you can negotiate, take advantage. Number 9, a side hustle. Now the purpose of this is not to abandon your job but to have something on the side to compliment it. So if you really wanted to do some sort of marketing or something like that, you could decide to do that on the side, make income that way and add that to the income that you're already making from your primary job.
Not only do you get to do what you enjoy doing, but you make more money doing. And for our final one, number 10, to hit a 1,000,000 is to not give up. Now this might seem extremely simple, but is the most important one on this list. Continue making consistent goals and don't give up because of the challenges. There will be chances ahead but if you can overcome them, you will reach your goal. Alright, everyone. Thank you for tuning into the MBIT markets business investing in tech podcast.
If you are on Apple Podcast and enjoy the episode, feel free to drop down a 5 star review down below. And for more on making sense of finance and the economy, check out my Twitter at mbit podcastinthegram@mbitpod, and we'll see you on the next episode. Disclaimer, the MBIT podcast is reflecting the opinion of only the host. The podcast is for informational purposes only. The podcast is also not a research report. It is not a recommendation to purchase or sell any stocks, holdings, or securities.
The podcast is also not meant to serve as a basis of any investment decision.