Saving Money:
How to Start Investing and Build Wealth
There are some people who are gifted with the ability to save money and there are some that are not. Unfortunately, most people are of the later type. Saving money is something that requires an inordinate amount of effort for most people and only with effort can they accumulate any substantial amount. If this profile fits you then the only way to save money is to use a system and discipline.
Saving money is one of the necessary requirements of building wealth. No matter how much you make, your income must exceed your expenses if you are ever to build wealth. And the only way this figure can be adjusted is by increasing income or decreasing expenses. Therefore, if you are unable to save money now then you have no choice but to decrease expenses.
The most
obvious question to ask yourself
for every expense that you incur
is the question, “Do you really
need this right now at this
point in time?” There are
actually very few things that
are necessary for our immediate
existence. However, as
human beings we have a way of
rationalizing even the most
obscure purchases for the sake
of necessity. Break
yourself of this habit.
Realize exactly what things are
needed and what things are not
needed.
The next thing to do is to create and stick to your budget. A budget will allocate a certain amount to frivolous expenses (i.e. anything non-necessary) that should not be adjusted. Whatever amount you decide to allocate toward frivolous expenses stick to it. Whatever amount left over is devoted to your savings. It is this that you must continue to build to accumulate wealth.
A good rule of
thumb is to take 10% off any
income you receive and set that
aside for savings. And I
do mean to physically take it
out. That means you
actually cash the check and get
the 10% in cash and then do
something with it like put it
into a savings account or an
investment account or even a
retirement account.
Whatever the case, the bottom
line is that the money is being
placed somewhere that you can
get to only with some
difficulty. This will
discourage you from using that
money when you have the desire
to make an impulse purchase.
Once this savings account has accumulated a sufficient amount, you should then take that money and purchase an investment with it such as a CD or a mutual fund. This is much more efficient than simply leaving it in a savings account where it will receive a minimal amount of interest. So in a nutshell the steps are as follows:
- Take 10% off the top of your income.
- Place that money in a savings account or something similar.
- Let that money accumulate until it is a sufficient sum for purchasing a better investment such as a mutual fund or CD.
- Repeat the process.
If you follow these steps month in and month out then you will begin to build a savings account that will make you more financially secure and much closer to your long-term financial goals.
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