How to use your savvy shopping skills to build long-term wealth

Saving money at checkout is a fun win, but the benefit is short-lived if you quickly spend the savings. Here’s the financial trick most overlook: You can turn your savvy shopping skills into a runway for long-term wealth. Read on to find out how.

Turn shopping wins into wealth moves

There are two general ways to use money. You can buy things that immediately lose value or you can allocate cash to debt paydown and assets that gain value. The first option depletes your wealth, while the second improves it. Choose to redirect your shopping wins towards wealth-improving strategies and they’ll repay you many times over.

Here’s an example. Say you use FreeShipping.com for cashback rebates. Your monthly payout nets you $10 over the cost of your membership. If you invested that $10 in an S&P 500 fund monthly for 10 years, it could grow to about $1,678 before taxes and after inflation. The first $1,200 represents your total contributions, but the rest — an estimated $478 ­— is earnings. Call it your reward for being patient and disciplined.

Now imagine applying that thought process in a bigger, broader way. Give up your Netflix subscription and redirect $90 a year into your investment account. Switch your car insurance and invest the $300 you saved. Invest the $200 birthday check from your parents. You get the idea.

The combination of consistent saving and investing over time builds lasting financial security. Add in your shopping skills and you have all the components of an effective wealth program.

Prioritizing your money moves

Investing excess cash is not the only way to improve your wealth, nor is it always the most appropriate. You may need to make other, foundational money moves first. Every situation is unique, but most savers benefit by tackling financial objectives in this sequence:

1. Get your budget in order. You cannot spend more than you make and improve your wealth at the same time. Establish some spending controls right away. A structured framework like the 50/30/20 plan is a great starting point. You can then brainstorm ways to improve your income, such as a side hustle or promotion.
2. Pay down debt with double-digit interest rates. Credit card balances cost more than you can earn investing, so pay those off first. Commit to an aggressive payoff plan or refinance the debt, but get it repaid.
3. Build an emergency cash fund. Having enough cash to cover three months or more of living expenses protects you from accumulating high-rate debt if you unexpectedly lose your income. Keep the money in a high-yield savings account, so it’s earning a competitive interest rate.
4. Make sure you are appropriately insured. Insurance protects you against financial catastrophes. Carry enough coverage so you’re not wiped out by a freak accident.
5. Invest. Low debt and cash savings support successful investing. If your financial position is unstable, you’re more likely to stop investing or sell your investments before they’ve had time to grow. It’s far easier to record gains by holding the asset for a long time. That applies to traditional investments like a Vanguard S&P 500 fund and more specific things on your wish list, like a 1966 Shelby GT350 Convertible or the historic American double eagle issue gold coin.

Automate the leap from saver to investor

Automation helps you break the spending cycle and create positive financial habits. Start by defining your top financial priority. Then set up rules to transfer money to fulfill that priority. You might have an autopay from your checking account to your credit card, or a 401(k) contribution from your paycheck for retirement. If the money comes from your checking account, time it so the withdrawal happens on or near payday. That puts the money to work for you right away.

Resist lifestyle inflation and reward spending

Lifestyle inflation is a major risk for anyone working towards financial independence. It happens when you use higher income as a reason to spend more. After a big promotion, you might upgrade your streaming subscriptions, eat out more often, or start buying more expensive clothes. These changes can be so gradual, you don’t notice them until your credit card balances start increasing.

Reward spending is the tendency to spend more because you saved. You might mentally subtract the discount from the price tag to justify a purchase you otherwise couldn’t afford. Or you might save $100 on the designer bag and then buy $100 pair of shoes and call it even.

If you treat a promotion or discount earned as an excuse to splurge, you miss the long-term wealth opportunity. You also reinforce that spending habit that can work against you over time.

Avoid those issues by tracking your savings and the amounts you’re putting towards your long-term financial health. This doesn’t have to be complicated. A notepad or spreadsheet can do the job.

The opportunity in smart shopping

Many people use their smart shopping habits to buy things that are otherwise unaffordable. But there’s a bigger opportunity there. You can use those shopping wins as opportunities to reshape your finances. Each discount, deal, or rebate you secure is one move towards financial independence.

The strategy works in part because, unless you win the lottery, wealth is created in a series of steps over time. You spend a little less, pay off a little more, increase investment contributions slightly. Keep making those moves repeatedly and they always pay off.

Frequently asked questions