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 to build wealth is something that requires an inordinate amount of effort for most people even though investing is a priority. 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. 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.
Also read: How to save for wealth
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.
Also read: Startup financial steps many ignore
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.
Also read: Steps to the right budget
A good rule of thumb is to take 10% off
any income you receive and set that aside for savings.By
this, 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.
Also read: How best to save for retirement
Also read: How best to save for retirement
Once this savings account has
accumulated a sufficient amount, you should then take that money and purchase
an investment with it such as 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. In Nigeria, a higher 40-50% savings and purchasing a
plot of land is the likely commonest idea, though, a scalable business network
is a better investment. So in a nutshell the steps are as follows:
Also read: How to build wealth as a couple
Also read: How to build wealth as a couple
- Take 10-50% 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.
- 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 to invest, and much closer to your long-term financial goals. Start today!
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