Saving money is probably the least exciting part about being an adult. The reality is without being able to save for the future you have no chance at building wealth. To make sure we have a profitable tomorrow we must plan for it today. One common theory as to why people don’t start saving sooner is because they cannot imagine their future selves so they don’t plan. Having to worry about student loans and short-term financing can make it harder for us to save but it’s possible if you pay yourself first.
I’ve been saving money since I learned how to count it. When I was a kid I used to have a personal rule for anything I wanted to buy: only buy when you saved enough to buy two. Maybe it was a silly limitation to set on myself as an 8-year-old but no matter what I bought I always ensured I had more money than I needed to spend.
Nearly half of Americans say their expenses is equal or greater than their income.
We mismanage resources that aren’t measured. If you have no plan with your money other than to spend it that’s exactly what you’re going to do with it. I automated my monthly spending by breaking down my monthly spending into categories.
I created this spreadsheet to calculate how much I need to make monthly to reach my goals. The first page is an expense tracker that shows what my monthly fixed costs are, things like rent, electric bill, internet etc. some expenses like food and gas will probably require a credit card or bank statement. Estimate 10% higher than what you actually spend to account for extra driving or the occasional expensive meal.
Savings (in percent)
I pay myself 30% of every paycheck I receive. It’s already coded into the spreadsheet but you can choose to save 20% or even 10% depending on your expenses and debt. Once your debt is paid off you can afford to pay yourself more.
Planning for the future is important. Max out your 401k, you are throwing away free money if your employer offers a match for it. Typically you can contribute up to 15% of what you earn toward your retirement.
Investing to grow your money is a great way to build wealth. How you choose to invest, whether it’s day trading or using an automated investment service which trades and manages your money for you is up to you.
The remainder is spending money.
When you know exactly how much money you spend monthly you don’t have to worry about budgeting every day because all your expenses are taken car of.
Question: What’s your biggest obstacle that’s preventing you from saving money.