Ashley Donohoe
4 min read
A Pew Research Center survey found that only 37% of Americans believed their finances would be in better shape within one year. Many reported struggling to cover their medical care or housing costs and needing to get loans from loved ones.
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If you’re unhappy with your situation, you need to figure out exactly what to focus on so you can become more financially secure. This likely involves going beyond eliminating small, frequent expenses, like your daily premium coffee.
A YouTube video from money expert Jaspreet Singh explained five changes that will have the biggest impact on your finances — start making these moves today.
Singh said it’s common to unknowingly pay too much in fees for your retirement account. Various funds have an expense ratio that you pay for annually, depending on your earnings and investments. While the fee might seem small, it could cost you hundreds of thousands or even millions.
Singh gave examples of the VFIAX and GFACX funds with respective expense ratios of 0.04% and 1.36% and average returns of 12.5% and 12.6%. If you spent 30 years investing $1,000 per month in those funds, you’d reach $3.56 million with VFIAX versus $2.7 million with GFACX. That difference shows it’s crucial to know what you’re paying and change investments if needed.
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“If you are paying higher fees, make sure the returns are justifying the fees,” Singh said. “Because what we’ve seen through history is that, in general, high-fee accounts do not outperform the lower cost, lower fee, passively managed accounts when you look at it over the long run.”
A report from the U.S. Bureau of Labor Statistics identified housing, transportation, food and health care as some of the largest household expenses in 2023.
While you might think of cutting back on the less important stuff, Singh recommended targeting the major expenses if you’re financially strained. For example, he said you could look for a cheaper place or vehicle and invest the savings. Other options could include splitting costs with a roommate and using alternative transportation, like carpooling or taking the bus.
According to Singh, you might save up to $1,000 each month if you’re strategic with your cuts. After you’ve built up wealth, you’ll find it more realistic to spend money on fancier things without stress.
