When would now be a good time to start saving and investing?
And why nobody ever went broke saving money!
Our habits are developed over our lifetime – good and bad. Our habits are a reflection of the things we believe, the things we read and listen to and our choices in friends. Our lives are best defined by our habits.
Every habit you possess has been developed. You don’t have any habits that came with you at birth. A birth certificate gives people the right to achieve your dreams, but a birth certificate does not give you the skills and habits that will ultimately structure your life. Those are built, nurtured and developed over time.
For example, you weren’t born brushing your teeth. You had to develop that habit. Do you ever miss a day of brushing your teeth? Of course not. That’s the power of a habit.
So, let’s look some wealth creating habits. Let’s also look at what not to do.
Here are a couple of characteristics of really bad money habits:
Poor money habits have many people focusing all their time and energy on making money. They don’t have it, they want it, and they will do anything to get it. When people chase money, they end up broke.
Have you ever heard it’s not what you make it’s what you keep that matters?
Do a quick math problem. How much money have you earned in the last 5, 10, 20 years? Now how much of that do you still have? Living well below your means and saving is a fundamental wealth building principal
Let me back up a little here and define a healthy definition of money.
When it comes to money we all need income to survive and either you control money or money controls you. Money is not evil it’s just the fuel of life. Money just makes you more of what you already are. If you are a bad person more money will make you worse. If you are a good person you can do more good with more resources.
Develop a healthy mindset regarding money. Many people think of money as a “problem”.
Instead, begin thinking of money as energy, as a resource and as a tool to be managed and used wisely.
Contrary to what many believe, money is not the root of all evil; it’s the love of money is. Loving money will lead to an insignificant life. Real wealth comes from financial security, and the ability to changes lives and serve others.
Why do so many fail to change their spending and savings habits?
I believe money problems overwhelm people into inaction and procrastination. Many fail to change their financial life because they demand far greater results than they can immediately obtain. You can avoid this mistake by taking small incremental steps towards what you ultimately want to achieve and persist no matter what. If you get off track, or should I say when you get off track…. RESET and RESTART.
We must change our outlook and mindset about money and by doing so we will open possibilities you never knew existed.
Get a plan started RIGHT away and add to it over time
“If I Had more money I would have a better financial plan”. or is it? “If I had a better financial plan I would have more money?”
Financial Reality Problem:
1) Most people have been taught how to work for money but they were not been taught how money works.
2) Most people make just enough money to qualify to get into debt, they do not make enough to get out of debt or avoid it completely.
3) You are not “Well Off” until you can take time off and still live well.
4) Income producing assets are the key to financial freedom.
5) Most people do not know the difference between assets and liabilities (assets make you money and liabilities cost you money). Many people believe their cars are assets….do you?
“Believe it or not, affect the way you stand, the way you walk, and the tone of your voice. In short, your physical well-being and self-confidence. A man without savings is always running. He must. He must take the first job offered, or nearly so. He sits nervously on life’s chairs because any small emergency throws him into the hands of others.
Without savings, a man must be too grateful. Gratitude is a fine thing in its place. But a constant state of gratitude is a horrible place in which to live. A man with savings can walk tall. He may appraise opportunities in a relaxed way, have time for judicious estimates and not be rushed by economic necessity.
A man with savings can afford to resign from his job if his principles so dictate. And for this reason, he’ll never need to do so. A man who can afford to quit is much more useful to his company, and therefore more promotable. He can afford to give his company the benefit of his most candid judgements.
A man with savings can afford the wonderful privilege of being generous in family or neighborhood emergencies. He can take the level stare of any man… friend, stranger, of enemy. That ability shapes his personality and character.
The ability to save has nothing to do with the size of income. Many high-income people spend it all. They are on a treadmill, darting through life like minnows.
The Dean of American bankers, J.P. Morgan, once advised a young broker: “Take waste out of your spending; you’ll drive the haste out of your life.” If you don’t need money for college, a home or retirement, then save for self-confidence. The state of your savings does have a lot to do with how tall you walk.” Author unknown
Who is the last person in your household to get paid?
Pay Yourself First
Put another way, spend less than you earn!
This is the most basic financial rule…you’ll never get ahead financially if you spend more than you earn. Turn saving and investing into a regular fixed monthly expense, just like your rent or mortgage payment or a car payment. Consider having a fixed amount automatically deducted from your paycheck or checking account each month and placed into a savings or investment plan. As your salary increases, consider increasing the amount you automatically save and invest each month.
A basic way of budgeting is to establish and stick with a formula, such as 20% of income for saving/investing.
Great advice from Grant Cardone self-made millionaire and entrepreneur
“How Average People Create Wealth”
…. I’m an average American — I didn’t get rich quick, wasn’t lucky, definitely not privileged and didn’t attend a fancy school. I created wealth by avoiding the mistakes most Americans make and took actions that most average people refuse to take.
Most Americans have been made to believe that creating wealth is either almost impossible or not important….
Here is a short list of pitfalls to avoid and actions to take that will ensure even the average can become rich.
Pitfalls to avoid:
2. Spending on “stuff”
3. Not saving “years” of cash
Avoid spending money on “stuff.” I know guys that have zero savings and as soon as they get a bonus they blow it on stuff. I didn’t buy my first Swiss watch or German car until I had a million dollars working for me.
Financial planners suggest three months of cash in savings. In my newest book, The 10X Rule, I explain how even “the professionals” incorrectly estimate what it takes to create financial freedom. Consider the millions of people that have been out of work so long that the government extended unemployment benefits to 99 weeks! Three months?
You need three years of savings for emergencies and investments!
Shortlist of actions to take:
1. Increase your income.
2. Save as much as you spend.
3. Bank cash in “sacred” accounts.
…Start saving $1 for every $1 you spend. I started this at the age of 25 and most people think it is impossible but it’s not. For every dollar I spent, I had to save (after withholding taxes) the same amount. If I spent $6000 a month I had to save $6000! This will force you to focus on both parts of the wealth creation formula — spending and creating.
The third thing is to put your free money into multiple “sacred” accounts. Never leave your money in checking accounts, get rid of it by assigning it to “future-use” accounts. (Accounts that give you Liquidity, Safety, Use, Growth, and Control) Put all overages into accounts that are sacred and will not even be used for emergencies. Warren Buffett is famous for hoarding cash so that when a great opportunity presents itself he is loaded up and can pull the trigger.
Creating financial wealth, even getting rich, is still available to the average American if you just avoid the pitfalls and take the right actions.
Only 3 percent of all the millionaires inherited their wealth, 41 percent of all millionaires didn’t go to college, their average GPA was 2.9 and only one-third of all millionaires work for themselves. And if you think money won’t make you happy, 70 percent of all millionaires say money created a higher life satisfaction.
The only secret about getting rich is that there ain’t no secret!
Don’t be suckered by “get rich quick” schemes or think that getting rich is as simple as some supposed “law of attraction.” The American dream is not dead and creating wealth for the average American only requires going for it, hard work, discipline, saving, good investing and executing a plan! (FIP)
Dedicate money for saving and investing.
The first step to financial freedom is determining how much of your money you will save and invest. While simple, this decision is not easy for most people because it creates a feeling of deprivation.
“If I save and invest my money, then I can’t do all of the fun things that I want to do,” most people say to themselves.
The majority of my readers are 25-45 years old. While it sounds far-fetched right now, human life expectancy could increase to 100+ years of age within the next 25-30 years which raises an important question: Will you outlive your retirement?
If you think it is hard to make a living when you are young and healthy, imagine how hard it will be to make a living when you are old and frail.
“That’s impossible,” you say. “What about Social Security and 401(k)?”
What about your Social Security?
First of all, Social Security only pays a fraction of your income. Don’t believe me? Try this Social Security Retirement Estimator provided by the Social Security Administration. Once you account for inflation, your Social Security income will barely cover your cost of living when you retire (if you are lucky).
Secondly, many doubt that Social Security will even exist over the next 10-20 years. Millennials should get used to the idea of working until they die because that is the most likely scenario.
I don’t want you to be depressed or instigate fear. Instead, I wanted to make you wake up and realize that many of the clichés that we have been fed since birth are anything but true.
• Buying a house is a great investment. (False.)
• Investing in your 401(k) is the way to financial freedom. (False.)
• Getting a college education is the only way to become successful. (False.)
What about 401(k)?
If you actually believe that you can save a measly 5-10% of your income for 40 years and live off of the savings for another 40 years, you need to wake up.
Most 401(k) plans are loaded with fees which strip you of your wealth. In fact, the average mutual fund company takes 2,99% per year in fees (LA Time) of various kinds. That has a serious impact on your investment returns
Bottom Line: Your future is in your hands.
Whether you like it or not, you must save and invest your money smartly for your future. It does it take time patients and some effort…. just like anything worthwhile….yes it does
Saving and investing money may not be sexy, or cool, but it will helps you sleep at night. You owe it to yourself (and your family) to save money on a grand scale and protect yourself from the storms and squalls of life.