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The Best Advice for Saving as Much as You Can

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.

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The Best Advice for Saving as Much as You Can

The Best Advice for Saving as Much as You Can

https://twocents.lifehacker.com/the-best-advice-for-saving-as-much-as-you-can-1821196524

twocents.lifehacker.com

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Key Ideas

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.

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

  1. 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.
  2. Put yourself in the right place geographically.
  3. Do some side hustles. Books, freelance writing, speeches, whatever work you can get your hands on.
  4. You cannot benefit from real estate or investments if you don't start saving early.

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Keep everything as simple as possible
The more credit cards you have, the more chances you have for identity theft and the more chances you have to miss a payment. The more investment accounts you have, the less attention you can give ...
Don’t ever let your “future self”...
...take care of your current situation.

Your future self might have more income, but it’s also fairly likely that your future self might have less income and you’ll find yourself in a really bad situation. 

Even if your future self is doing well, there are probably going to be other big expenses that you’ll want to deal with at that time, like buying a house.

Focus on...
  • Building an emergency fund: set up an automatic weekly or monthly transfer from your checking account to your savings, then leave the savings alone until an emergency appears.
  • Eliminating high-interest debt: Set up a simple debt repayment plan by organizing your debts by interest rate, then attempt to make a double payment on whatever debt has the highest interest rate.
  • Saving for retirement: It will actually end up being a much smaller burden than you expect,  lifted up by the pleasure of knowing that you’re securing your retirement.

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Investing

... is the trading of your money today for a lot more money in the future. It is a high yield over the long term.

What happens to your money

Banks don’t like to give away their money. That mindset is reflected in the interest rates of checking and savings accounts of 0,5% and 0.9% avg. annual interest respectively.

When you deposit your money in the bank, the bank turns around and invests that money at 7% a year or more. After they collect their profit, they give a tiny shaving of it to you.

Portfolio and Diversification
  • Your portfolio reflects your long-term wealth building investment strategy – not the short term. It includes everything you own. Your retirement accounts, your investment accounts, even your home are types of investments.
  • Diversification is a way to describe owning multiple types of investment assets. Diversification is smart because you both protect yourself from failure and position yourself to take advantage of multiple robust methods for building wealth.

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Smart retirement planning boils down to a few simple truths.
  • Time is on your side.  The earlier you start saving money, the more time you give compounding to work for you. 
  • Take risks when you're young.  Althoug...