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The Best Advice for Saving as Much as You Can
Understanding personal finance
It is possible to make a budget work while still saving enough to retire. It starts with learning to change your habits so you can put money aside.
It is not that easy to make any sort of real, lasting change in your habits. You will have a few setbacks, and that's ok.
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Knowledge is power
When it comes to money, people will do whatever they can to get hold of your money, regardless of how it will affect you.
Don't rush into any sort of decision making. Always consult a second source.
Automate anything you can
Assuming you have enough to cover the bills and aren't pulling an overdraft fee, start by automating your retirement savings. You know you need an emergency fund, so automate. Do the same with increasing your 401(k) contributions each year, or paying off your credit card debt.
Finances are bigger than your paycheck
Our personal finances don't exist on their own. They are connected to the economy and government laws and regulations. It all is as much part of your finances as to how you spend and save your paycheck.
Educate yourself. Call your members of Congress and let them know what you think.
Train yourself not to adapt
We have this idea that if we just make a certain amount of money, we're going to do great. But it doesn't work like that. We find ourselves always adapting our spending and lifestyle to our income.
Be careful with your spending even if you suddenly have more than you need. Don't chase temporary pleasure with money. Continue to live below your means.
Save a percentage of each paycheck
Put 10 % away from each check you receive to create a cash buffer for emergencies. Try and increase it with time.
Get started
- Start early. The more time your money and investments have to grow before you need them, the more money you’ll have all things being equal. Every little bit counts, even to only to get into the right habits.
- Put yourself in the right place geographically.
- Do some side hustles. Books, freelance writing, speeches, whatever work you can get your hands on.
- You cannot benefit from real estate or investments if you don't start saving early.
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Start a financial independence journey
One of the most challenging aspects to change your finances is getting started.
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Set alerts to work on your finances
From the day you start saving, put a reminder on your calendar once a week to work for one hour on your finances in some way. It could include reading, balancing the accounts, optimizing cash flow, researching funds, etc.
There is no right number of times to check on your account. If you feel the urge to make decisions based on the news or market changes, limit how many times you look at your accounts. With experience, you will gain more control.
Dealing with demoralization when saving money
Once you understand where your money is going and what is left for savings, you may feel demoralised. Even though the amount is small in the first few months, you may be surprised by how much your balance grows in six months or a year.
The power of compound interest is what helps accounts grow exponentially and reach your savings goals quicker.
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A Monthly Budget For Your Money
No matter how little or how much money you earn, creating a monthly budget is one of the most important aspects of managing your finances. What gets measured gets managed.
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The Envelope System
The Envelope system is a way to track your variable expenses like food, entertainment, and drinks.
This method, preferably used weekly, allocates a certain amount in each category in labeled envelopes (food, drinks, movies, etc.). Once the envelope is empty, you are done spending in that category.
How to Create a Good Budget
The principles that make a good budget, something you can stick to:
- Being Realistic: Being too strict is a recipe for failure.
- Making Adjustments: A budget is not set in stone, but a fluid thing.
- A Team Sport: If you live with a partner or spouse, you have to agree mutually on how to budget the financials.
- Expect the Unexpected: Keep an emergency fund, ideally 3-6 months of necessary expenses.
- Budgeting the Expected: Certain upcoming expenses need to be budgeted in advance, like property tax, holiday shopping, etc.
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Side Hustle to Make More Money
You don't have to sacrifice all of your free time to start a side hustle, use the time you’re comfortable with and make a little bit of progress every day.
Take Action
Get to working on improving your finances today, not tomorrow. Reading the steps and thinking you’re capable of doing it but postponing it is just an excuse, an unprofitable one.
Communicate With Your Partner
Talking about your financial goals, and scheduling time once a month to go over your finances together can prevent money from affecting your relationship.
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