deepstash
Beta
Deepstash brings you key ideas from the most inspiring articles like this one:
Read more efficiently
Save what inspires you
Remember anything
6
Key Ideas
Save all ideas
Automate Your Savings
The best way to attain financial success is not about having a budget or avoiding debt, or even choosing the right investments, but about having a system that makes automatic wealth creation possible for you while you sleep.
Investors make a lot of stupid financial decisions based on emotions and sentiments and putting money on ‘autopilot’ saves us from giving to temptation and laziness.
110 SAVES
531 READS
Self Control And Laziness
Will power and self-control are like a muscle that can be strengthened. The more we practice self-control, the better we become in implementing the same.
Our laziness too plays a big part in hurting our wallets, like forgetting to pay bills that incur late fees, or overspending on credit cards and paying for subscriptions that are not in use.
118 SAVES
457 READS
Brain On Autopilot: Tiny Habits That Work
Automatic behaviours trigger better decisions and make the entire process seamless. One thing compliments the other, and good habits give space to other good habits.
Example: When a person is dressed up nicely, they tend to work harder.
112 SAVES
471 READS
Put Your Money On Autopilot: Savings
Start by saving a certain amount every month from your paycheck (using automatic transfer), and also work towards building or completing your emergency fund.
Clear any high-interest debt you may have and also save money on your next life goal, like buying a house or a car.
107 SAVES
403 READS
Your Bills On Autopilot
Use a rewards credit card, online bill pay or automatic bank draft to put all your bills on autopilot. Be aware that using your bank account for automatic payments has some concerns like:
- There is maintenance required in case you change your biller or bank.
- If phone bills get racked up due to unfair roaming charges and get automatically debited from your account, your cell phone company may not give it back.
- Bounced payments incur additional bank charges and penalty.
101 SAVES
317 READS
Investments On Autopilot
Your investment portfolio can be put on autopilot, making use of the Systematic Investment Plans (SIP).
You may have subscriptions on movie streaming platforms, or even the gym that you no longer go to, which is draining money from your bank account. You need to clear away any autopilot subscriptions that are vacuuming cash from your account.
101 SAVES
444 READS
SIMILAR ARTICLES & IDEAS:
Regular monthly bills
The bulk of your budget is made up of necessities like rent, phone and internet bills, insurance, etc. If you can lower your monthly expenses, you can save a lot for unplanned events.
Debt when you're on a tight budget
There are a couple of paths you can take to pay off your high-interest debt when you're on a tight budget.
- The snowball method. For those who need to see progress, pay off the lowest balance first. You'll feel inspired to keep going.
- The avalanche method. Choose the debt with the highest interest rate to pay off first. This may require larger monthly payments and will take longer to see progress, but you will save the most money in the long run.
- If you need to prioritize your credit score, focus on paying down your credit cards first. Paying the ones you are near to maxing out will improve your score quickly by a few points.
- Set up payment plans, even if you can only afford a few dollars at a time. That way, your lenders can see you're paying something.
Incorporate unplanned entertainment in your budget
Financial professionals will advise you to cut out expensive nights out. In truth, you will have night's out, even when you're dirt poor.
To incorporate unplanned entertainment, set aside an amount each month. Be realistic. You can open another savings account for fun spending or you can use cash only.
The snowball debt method
With this method, you pay off your debts from the smallest balance to the largest balance, regardless of interest rates.
When you pay the smallest debts first, you start to...
The avalanche debt method
In the debt avalanche method, you pay your debts from the highest interest rate to the lowest interest rate, regardless of balance.
You will pay less in interest if you pay off your debts in this order. You will also pay it off faster.
Deciding between the Snowball and Avalanche debt methods
The supporters of the two methods are both enthusiastic about which one to use. However, it barely matters which system you use. The best approach is the one that keeps you motivated.
Make the minimum payments on all of your debt. Then, focus on one debt that bothers you the most and put every dollar you can towards it until it is gone. Then move on to the next debt.
How much you should save every month
The popular 50/30/20 rule states that you should reserve 50 percent of your budget for essentials like rent and food, 30 percent for discretionary spending, and 20 percent for savings.
But ...
Why 20 percent is recommended
Assuming you're in your 20s or 30s and can earn an average investment return of five percent a year, you'll need to save about 20 percent of your income so you can reach financial independence when you're older.
Financial independence means that you can maintain your chosen lifestyle entirely from the interest of your investments and dividends.
The four percent rule
The four percent rule states that you could withdraw four percent of your principal balance every year and live on this indefinitely. That means you need to save 25 times your annual expenses to become financially independent.
The four percent rule is not perfect. There is no risk-free investment that yields that much today. Sudden inflation could also cause a problem.