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If you’re like most people, you think about investments as specific financial instruments that build wealth. They’re the mutual funds and ETFs and stocks that you might add to your portfolio.
And you would be right — these products are instrumental to growing your net worth. However, they aren’t the only ways you can grow financial security.
Sometimes, an everyday decision can be your biggest investment. Here are small habits that have a profound impact on your finances.
1. Pay Off Your Line of Credit
Carrying over a balance on your line of credit has been normalized. Most people who have these accounts do it — some even use up their entire limit, maxing out their accounts.
But what is a line of credit good for if it’s maxed out? You’ll be paying interest on this full balance, and you can’t access your limit in emergencies until you pay it off.
Debt can even interfere with your purchasing power when it comes to true investments. Many people can’t pay down their balances because they live paycheque to paycheque, so they don’t have any cash to invest.
Whether you’re maxed out or carrying a small balance, you should aim to wipe your debts clean as quickly as possible.
Research suggests paying down debt is easier when you follow the snowball method. This debt repayment method insists you cover the minimum payments on all your debts, but you budget carefully to pay extra into the account with the smallest balance.
Targeting the smallest debt usually leads to the quickest victory, which studies have shown is a powerful motivator.
2. Pay Your Emergency Fund First Thing
Accumulating a balance on your line of credit is more likely when you don’t have any emergency savings in your bag of financial tricks. Unfortunately, these savings are often something that goes missing in the typical budget.
When things get tight, some people might postpone their monthly contributions to free up more cash in emergencies. Or, celebrating payday, some people simply splurge the money they mean to save.
You can prevent the latter from happening by sending your contributions at the top of your month — before you can accidentally spend your paycheque on takeout, new clothes, or a weekend getaway.
Most modern employers offer direct deposit options that can split your take-home pay between your chequing and savings accounts, so you don’t have to make this transfer manually. Once you save, you have to learn how to spend within your new boundaries, so be sure to budget carefully around your contributions.
3. Pick up a New Skill
One-third of Canadians are actively looking for a new job, while nearly half of all Americans are job searching. If you count yourself amongst them, this next investment idea could help you stand out from the crowd.
Improving your skills can unlock better paying positions, and it may even lead to a big career switch in your future. While traditional education is always an option, enrolling in college or university costs a lot of money. If you aren’t sure about a certificate or degree, try a Massive Open Online Course. MOOC for short, these online learn platforms offer a free or affordable way to learn new things.
Start Investing Yourself
A better job, an emergency fund, and zero debt, these financial milestones can help you create greater security in your future. Better yet, this financial foundation helps you invest in more traditional money market instruments.
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