Building wealth sounds great. But with rising costs of, well, everything, how do you set aside money to save and invest? To find out, we spoke to Vivian Tu, aka Your Rich BFF. She dispenses smart, realistic financial and investing advice to her 2.1 million followers on Instagram and has a book, “Rich AF: The Winning Money Mindset That Will Change Your Life” coming out on December 26. Here, she shares how to cultivate a wealth mindset, no matter how much money is in your bank account.
Featured Expert: Vivian Tu
Vivian Tu - Your Rich BFF and author of “Rich AF: The Winning Money Mindset That Will Change Your Life”
How do you break the paycheck-to-paycheck cycle?
Breaking the paycheck-to-paycheck cycle isn’t easy, and it certainly can feel tone-deaf to hear, “Just budget!” While we focus a lot on lowering our spending, the other half of this equation is making more money. This can include asking for a raise or picking up a side hustle like dog walking, babysitting, or data entry. Ultimately, when your expenses and your income are balanced out, it’s hard to find those extra dollars to save and invest for your future. The easier, and often overlooked, solution is to increase what’s coming in the door vs. trying to hold on to every single penny.
What’s the #1 financial habit that will help me build wealth?
Investing early is the single most important thing you can do to build wealth. No matter how little, investments are a time game. Multiple studies show that if two people invest the same amount, the person who started earlier will end up with significantly more than the person who started later. The best day to start investing was yesterday, but the second-best day is today. With things like fractional shares and robo-advisors, investing has gotten a lot easier, and who wouldn’t want to start building their wealth earlier?
What is the easiest way to start investing?
The easiest and fastest way to start investing is by using a robo-advisor. There’s no shame in the technology game! A robo-advisor has you fill out a short questionnaire about your income, money goals, age, occupation, lifestyle, etc. and then builds a risk-appropriate portfolio for you. Robo-advisors take out some of the stressful decision-making around investing and give you the best recommendation to fit your financial life. Your investment profile shouldn’t be some random place where you throw money in from time to time. It should be prioritized to fit your lifestyle, not the other way around.
What’s the biggest money mistake people make, and how can they fix it?
The biggest money mistake that people make all the time is setting cash aside for investing, but then not actually investing it. People will select a brokerage, open up an investment account, and even fund the account with cash. But investing doesn't happen unless you use that cash to actually buy assets. So don’t let your money sit as cash in your investing accounts. Make sure you’re buying a diversified portfolio of investments like index-tracking ETFs and target-date retirement funds.
What three financial rules do you always follow?
The first major rule of thumb I follow is to pay yourself first. You have to take care of Future You first! Paying yourself first means that you prioritize your savings over other less important discretionary purchases. Once you have established a sustainable budget, edit your direct deposit so that your specific saving amount goes directly into a savings account instead of to your checking. In the best possible way — out of sight out of mind!
Speaking of savings accounts, another rule to follow is opening a high-yield savings account, aka an HYSA. With an HYSA, you can get up to 10 times more in annual percentage yield, aka APY, than a traditional savings account. I recommend a SoFi HYSA because they also provide a high-yield checking account, too! I like my money just sitting around and making me more money.
Another rule I always follow is the seven-day rule. Like everyone, I love a good online shopping spree, but it can quickly lead to spending way too much money. Basically, the seven-day rule dictates that you add what you want into your online shopping cart as long as you leave it for seven days before checking out. If you’re still thinking about the item or service after a week, then it’s a worthwhile purchase that you’ll actually use. If not, you probably didn’t need it anyway!
This interview has been edited and condensed for clarity.
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