24 Ways to Get Richer by 2020

Did your 2019 New Year’s resolutions have anything to do with your financial health? Maybe you want to start investing or learn how to do it better. Maybe you want to get better about saving money. Maybe you want to earn more and waste less. Or, maybe you want to do all of the above.

Whatever your financial goals, here are 24 ideas to help make you a richer, more financially healthy person by the time 2020 rolls around.

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If your goal is to make 2019 the year you finally start investing, the first thing you’ll need to do is to open a brokerage account. Start by comparing the different popular online brokerages, deciding what features are most important to you, and weigh the pros and cons of each option. This may sound complicated but finding the best online brokerage for you doesn’t need to be if you know what to look for. Also, decide if you want a standard (taxable) brokerage account or a tax-advantaged IRA to help save for retirement. 

If you decide to open an individual retirement account, or IRA, the next decision you’ll have to make is whether you want a traditional IRA or Roth IRA.

A traditional IRA can be a great way to lower your tax bill each year. Specifically, investors who qualify can deduct all of their traditional IRA contributions, up to each year’s maximum. For 2019, the IRA contribution limit is $6,000, with an additional $1,000 catch-up contribution for savers age 50 or older.

While there are a few other differences between the two, the primary difference is the tax implications. With a traditional IRA, your contributions can be deductible and your investments will grow tax-deferred, but your eventual withdrawals will be treated as taxable income. Therefore, traditional IRAs make the most sense for people who believe their current tax bracket is equal to or greater than the bracket they’ll be in after they retire.

A Roth IRA can be a great investment account, especially for people in lower tax brackets.

Here’s why. Roth IRA contributions are not tax-deductible. However, you won’t pay a penny of tax on qualifying withdrawals from the account.

In addition to the potential for tax-free retirement income, there are a few other reasons to consider a Roth IRA. For one thing, Roth IRA contributions (but not any investment profits) can be withdrawn at any time, and for any reason, making these accounts excellent choices for savers who don’t necessarily want their money tied up until retirement.

A dividend reinvestment plan, or DRIP, can be a powerful tool for stock investors for a few reasons. First, it makes the reinvestment process automatic -- dividends you receive are automatically used to buy more shares of the stock.  Second, a DRIP allows you to put your entire dividend to work, meaning that you can own fractional shares of stock. Third, a DRIP lets you invest in additional shares without paying any brokerage commission.

The caveat is you generally have to manually enroll in a DRIP, so check with your brokerage and enroll today if you haven’t done so already.

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When asked for advice by first-time investors, one of the first things I suggest is to automate the process. In other words, instead of telling yourself that you’re going to invest $X per paycheck, or that you’ll deposit money to your brokerage account here and there, set up a recurring transfer from your bank account. It can be monthly, every payday, or another interval. Doing so not only allows the principle of dollar-cost averaging to work in your favor, but it makes your investments mandatory, not a choice, and will greatly improve your chances of success.

To be sure, buying an investment property has its drawbacks, and isn’t right for everybody. For example, a property could unexpectedly sit vacant for a few months, unforeseen maintenance issues can get expensive, and property taxes and insurance costs can vary over time.

Having said that, owning real estate is not only a way to generate excellent returns on your capital, but it can also add diversification to a stock/bond investment strategy. 

Many investors, both young and old, are afraid to put any money in the stock market, and it’s not hard to see why. Lots of younger investors saw their parents get crushed in the dot-com bubble or in the Great Recession, and it’s a common myth among older investors that stocks are simply too risky.

However, stocks remain the best way to generate strong investment returns over long periods of time, and an age-appropriate stock allocation is a good idea for all investors. As a good rule of thumb, subtracting your age from 110 can tell you the approximate percentage of your portfolio that should be in stocks, with the rest in fixed-income assets.

Warren Buffett has said “when it rains gold, you put out the bucket, not the thimble.” In other words, when investors are selling and the stock market plunges, that’s the right time to buy.

It’s common knowledge that the idea behind investing is to buy low and sell high. By avoiding the market when it gets volatile, you’re setting yourself up to do the exact opposite. If the market (or some of your favorite stocks) drops in 2019, don’t be afraid to take advantage of the weakness.

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In 2019, workers are allowed to defer as much as $19,000 into their qualified employer-sponsored retirement plans. While it may not be practical (or even necessary) to save that much, the point is that there’s lots of room for improvement.

Many financial planners (myself included) say that Americans should try to save at least 10% of their salary, not inclusive of any employer matches. If you’re not there yet, one strategy is to increase your contribution rate by 1 percentage point per year until you get there.

The national average savings account interest rate is a puny 0.09% as of this writing. Meanwhile, rates of up to 2.25% are readily available through reputable, FDIC-insured online-based banks like Marcus by Goldman Sachs, Synchrony Bank, and more.

To be sure, 2.25% isn’t a huge return, but on an emergency fund of say, $10,000 or more, that’s a big difference, and can help your savings naturally do a better job of keeping up with inflation over time. 

It has never been easier to find a flexible way to earn extra money. You could drive for Uber or Lyft in your spare time, or deliver groceries for Shipt, just to name a few options. There are numerous food delivery services that are looking for drivers as well. Or, if you have valuable skills, check out freelancing marketplaces like Upwork. 

There are two basic ways to get richer. Make more money or spend less. If you make an extra $100 or spend $100 less, the net effect on your bank account is the same.

So, one way to make yourself richer by 2020 is to identify areas of wasteful spending and eliminate them. As a personal example, I can tell you that I pay about $15 per month for a landline phone I’ve used twice in four years, $35 per month for a newspaper subscription that I don’t read often, and $90 per month for satellite TV when I use Netflix and Amazon Prime more. Add these up, and that’s $1,680 per year I could be saving. Where could you stand to cut back?

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I often say that the key to long-term wealth is to spend the bulk of your money on things that will go up in value. Think houses, stocks, bonds, etc.

On the other hand, it’s generally a good idea to spend lightly on assets that lose value over time, especially expensive ones like cars. Think of it this way -- say that you buy a $30,000 car and finance it with a 6% APR loan for 72 months. You’ll end up paying a total of $35,797 for the car, and that doesn’t include the maintenance and other ownership costs along the way. And, by the time the car is paid off, you’ll be lucky if it’s worth $12,000 based on historical depreciation rates. Does that sound like money well-spent to you? Don’t buy much more of a car than you need.

Everyone knows about the health benefits of quitting smoking. As an ex-smoker myself, I can tell you firsthand how much better you’ll feel after quitting. Having said that, there’s a big financial reason to quit as well.

Simply put, smoking is an expensive habit. The average price of a pack of cigarettes in most states is between $6 and $8. Using the midpoint of that range, a pack-a-day habit costs more than $2,500. That’s money that could be used to take a vacation, save for retirement, or set aside for emergencies. If you’re a smoker, think of all the things you could do with an extra $2,500 each year.

I know, this is supposed to be about things that will make you richer, but hear me out. Fidelity estimates that the average couple that retired in 2018 will spend $280,000 on out-of-pocket healthcare costs. However, this is just the average. The average healthy retiree will spend much less and the average unhealthy retiree will spend more.

That’s not to mention the potential savings in the meantime. When you’re in better shape and eating right, you generally run into fewer health problems. It’s not inconceivable for good health to save you a six-figure sum throughout your life. So, make 2019 the year you finally start taking your fitness and diet goals seriously.

This may sound obvious, but it’s an often-overlooked way of boosting income. Many people are apprehensive about asking their boss for more money, but they really shouldn’t be. According to data from PayScale, 70% of workers who ask for more money are successful, and 39% of those get the exact amount they ask for. The lesson -- do a little research (Glassdoor.com is a good place to start) and be prepared with a figure to present to your boss. And, it wouldn’t hurt to brainstorm some good reasons as to why you deserve a raise.

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If you’re not getting paid what you’re worth, or at least reasonably close to it, it may be time to freshen up your resume and see what else is out there. As I mentioned in the last slide, Glassdoor.com is a good place to find out what you should be getting paid. The job market is extremely tight right now, and many companies are having a tough time finding qualified candidates to fill positions, so you might be surprised at what you find. 

This one may not translate into immediate financial rewards, but taking a class, or even enrolling in a certificate program for professional development can pay dividends down the road. Personally, I set out to take some financial planning courses just to increase my knowledge, and that’s what led me on the road to obtaining a graduate certificate in the subject, and eventually to sitting for the CFP® exam, which has paid off tremendously in several ways. Plus, taking a class can get you a nice tax break in the form of the Lifetime Learning Credit.

This one doesn’t necessarily make you richer, but it can certainly prevent you from becoming poorer. If you don’t have an emergency fund readily available, unforeseen expenses can force you to run up your credit card balances, sell investments, and make other undesirable financial moves.

Experts suggest that you should aim for six months’ worth of expenses, but this can be an intimidating amount of money if you’re just getting started. You don’t need much to greatly improve your financial health, and an emergency fund of just $500 puts you in a better position than half of Americans and should allow you to absorb expenses like a flat tire or urgent care visit without worry.

Aggressively paying down your credit cards can make you richer by minimizing your interest expense in the future. If you owe $5,000 on credit cards at 20% interest, you’re paying interest at a rate of $83 per month just for the privilege of owing money. That’s $83 that could be used to invest, build up your emergency fund, or otherwise make you richer. 

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As I’ve said before, getting richer doesn’t necessarily mean earning more money -- it also can mean reducing the amount of money flowing out of your pocket. So, it could be a smart idea to take a long look at the tax breaks you qualify for (and could potentially qualify for). As an example, if you’re under 50 and maximize your traditional IRA contribution for 2019, it could translate to $1,320 in tax savings if you’re in the 22% tax bracket, and even more if you’re a higher-earner. I recently did another slideshow of 25 potentially lucrative tax breaks that can help get you started.

I mentioned that it’s always a smart idea to stop wasting money, and that’s especially true when it comes to recurring expenses. Do you have a gym membership you don’t use? Magazine subscriptions you don’t read?

It’s even possible to trim expenses for services you want to keep. I’ve cut my SIRIUS XM bill in half simply by calling and telling them my bill had become too expensive. The worst that service providers can do is say no, so why not give it a try?

Did you know that if you were obtaining a 30-year fixed-rate mortgage, a borrower with a 720 FICO® Score would pay about $9,500 less in interest over the life of the loan than someone with a 690 -- even though both scores are generally considered to be “good” credit? The point is that seemingly small improvements in credit can result in big savings. It can be easier to improve your credit quickly than you think, so learn how the FICO scoring formula works and make 2019 the year you focus on boosting your credit score. 

As a final suggestion, whichever of these tips you plan to implement, do it as soon as possible. Procrastination is the enemy of financial health. After all, waiting to invest gives your money less time to grow. Delaying credit card repayment can result in massive interest expenses. You get the idea -- whatever you decide to do, get started as quickly as you can.

ALSO READ: 3 Easy Ways to Start Saving More Money Now

Even if you think you can only put one or two of these suggestions to work, you may be surprised at the impact it could have on your long-term financial health. As a couple of examples, depositing a $3,000 tax refund into an IRA could result in $45,000 in additional retirement income in 30 years based on the stock market’s historic average rate of return. Or, improving a so-so credit score by just 20 points could save the average homebuyer thousands of dollars in mortgage interest.

The bottom line: Small changes in your financial lifestyle can go a long way.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Matthew Frankel, CFP has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon and Netflix. The Motley Fool has a disclosure policy.