This should have been the very first post on this blog. Without the practice of conscious, regular saving, you don’t have the basic building block to grow any financial wealth. Borrowing money to fund a wealth-making project is not easy, as we’ve seen in the Wealth Algorithm articles.
Saving is natural to some people, and is a struggle to others. Some investors go to the extreme of being too thrifty, depriving themselves and their families of the basic needs of life. Money becomes the master! They work for money, rather than money works for them.
On the other extreme, we find the lavish spender, who can’t save a penny of whatever he/she gets every month. That is also wrong.
The reasonable approach would be to choose a percentage of one’s income, which is maintainable, without causing a damage of any sort; whether physical, social or emotional.
According to several financial studies, saving 10% on a monthly basis is affordable to most people. The key is to make this a habit, and put that amount aside before spending a dime. To use David Bach’s phrase, author of “The Automatic Millionaire”: Pay yourself first!
Yes, that’s true. If you left saving till after you’ve paid all the bills, bought all the stuff, there would be nothing to save. Whether your income is 100,000 or 2,000 a month, you should be able to save 10% regularly. It may take some revision of your spending patterns, a bit difficult at the start, but still doable, considering the tremendous benefits on the long run.
If you look at the previous article, that 10% was able to turn a mere $200 into one million over 10 years! Imagine if the savings were more than $200 a month!
To organize this habit, open an investing account only for those savings. Assume that account does not exist when it comes to daily or monthly expenses. Once you get your paycheck, or your monthly income in whatever form, deduct 10% and immediately deposit it in that account. You could also make it automatic. Your bank transfers the money for you at the beginning of every month.
In addition to proper organization, this takes discipline. The best source of such discipline is a clear vision of what you intend to achieve. Keep that vivid in your mind, and on paper, where you can see it daily.
Now that you have an investment account, with money deposited in it periodically, in the background, the next logical step would be? Yes, to start investing, wisely. Grow those funds, as we’ve explained extensively throughout The Wealth Maker blog!
Good Saving, Good Investing, True Wealth!
The Wealth Maker