5 Things I Do Every Month to Save a Ton of Money

When I was younger, I didn't manage money well. There wasn't a lot to manage, to be fair. I was making an entry-level salary and living in Los Angeles, so it's not as if I had much disposable income. But my financial habits weren't helping me, either.

I spent most of my earnings, and saving anything was a struggle. I still remember how disappointing it was to reach the end of the month and see how little progress I'd made.

Eventually, I realized that the only way to make real progress was to change my financial habits. I made some drastic changes, and they've had a huge impact. Nowadays, there are five things I do on a monthly basis that have made me successful.

1. Invest in an index fund

I used to think that investing meant analyzing companies, learning about things like P/E ratios, and making savvy stock picks. Then I learned that it's a whole lot easier, and less time-consuming, to just buy index funds.

An index fund invests your money in a basket of stocks, so you don't need to pick them yourself. I invest in a total stock market index fund with Vanguard. It follows the performance of the U.S. stock market as a whole, which has historically averaged a return of about 10% per year.

This has been one of the most impactful changes I've made. I invest a portion of my income every month. And if I have any extra money, which I often do, I invest that as well.

2. Transfer money to a high-yield savings account

I had trouble saving money for a long time. Like many people, I told myself I'd save whatever was left over at the end of the month -- an approach that rarely works out well.

There were two key changes I made here. I started paying myself first, meaning I save a portion of my income right after I get paid. No more waiting until the end of the month to see what's left.

I also opened a high-yield savings account. This is an especially important move to make right now because rates on savings accounts are currently extremely high. Some of the best high-yield savings accounts offer rates 10 times higher than the national average. Because my account has a high APY, it grows my savings much more. This also gives me extra motivation to put money in the account.

3. Use a rewards credit card for all my purchases

I pay for almost everything with rewards credit cards. The only exceptions are bills that can't be paid with credit cards, or when there's a surcharge for paying this way. But for my everyday spending, I'm pretty much always pulling out a rewards card.

Since I love to travel, I'm partial to using travel rewards cards. They usually save me $5,000 or more on travel expenses every year. Most people don't save that much, but I enjoy learning about travel rewards programs and seeing how I can use my points for luxury trips.

If you want something simpler, cash back credit cards are another great option. Let's say you get a cash back card that earns 2% back on purchases. If you spend $3,000 per month on your card, that's $60 in cash rewards. That'll add up to $720 per year you could add to your savings or invest.

4. Pay my credit card bill in full

Speaking of credit cards, there's another important habit to make it all work. When my credit card bill is due, I always pay the full balance. If I wasn't paying off my card every month, the card issuer could charge me interest. The average credit card APR is 21.59% right now, so that would wipe out the value of all my rewards.

Rewards credit cards only save you money if you pay them off every month. You need to pay the full statement balance to avoid credit card interest charges.

5. Set ambitious income goals for myself

The amount you can save depends on how much you earn. If you earn an above-average income, it makes life much easier. You'll have more money to save, invest, and spend on things that make you happy.

As a freelancer, I have some control over how much I make. Because I'm trying to aggressively build wealth, I set high income goals every month.

While you may not have as much control over your income if you have a full-time job, there are still ways to earn more. You could look for promotion opportunities or a new job. You could take on extra hours. Or you could start a side business.

Those are the financial habits that have worked well for me. Investing and paying yourself first are both moves that can benefit just about anyone. Using rewards credit cards are an easy way to save money, provided you pay them off in full consistently. And if you want to speed up the saving process, increasing your income can help with that.