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3 ways to financially get ahead of your friends

Everyone talks about ‘getting ahead’ financially. There are lots of ways to do better for yourself, but some things can really boost your money more than others.

Many people put money in the ‘too hard’ basket, but you don’t need to be a maths whiz to do some things.

Here are three of my favourite ways to financially get ahead:

Spend less than you earn

Most people have the unfortunate situation of spending all (or more) of the money they earn. You can’t save anything if you’re always spending everything you earn.

Spending less than you earn is imperative to get your finances in order. If you can just save 5% of your after-tax money you’re already doing better than a lot of other people.

There are several different approaches you can use to make sure you save. You could make sure you save a set amount first before spending any money. You could use a budget to make a plan for where your money is going. You can work on earning more than you do right now and save the additional income. Some banks like Commonwealth Bank of Australia (ASX: CBA) have free budgeting tools to help.

Whatever you do, spending less than you earn is an integral first step to getting ahead.

Invest

Over the long-term it’s investments like shares and property that will do the most to benefit your wealth. Having a bit of cash is useful, but after that it’s good to invest.

A lot of people only invest the mandatory superannuation contributions, so if you add more to your super or do some investing outside of super then you’ll definitely be getting ahead of most people, particularly if you’re fairly young.

As a shares guy I firmly believe that investing in businesses is the way to go. Shares like Alphabet (Google), Amazon or Altium Limited (ASX: ALU) have been incredible for long-term holders and there are many good investments out there today.

Lower your investment fees

In the past, regular investors like you and me were faced with expensive investment fees from both the broker and investment managers.

But these days there are investment managers like Vanguard and Blackrock who are willing to give you access to the share market for an annual management fee as low as 0.04% per annum. The lower the fees the more net returns that are left for your portfolio.

Vanguard US Total Market Shares Index ETF (ASX: VTS) and iShares S&P 500 ETF (ASX: IVV) are two of the cheapest exchange-traded funds (ETFs) that investors have access to on the ASX.

Foolish takeaway

The great thing about the above three strategies is that once you get started things begin compounding to better and better results over a lifetime.

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Motley Fool contributor Tristan Harrison owns shares of Altium. The Motley Fool Australia owns shares of Altium. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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