Wealth, Health, and Success

Savings

The first step to developing into debt freedom, discipline, and financial literacy is a firm understanding of savings.

Ask yourself, why are we told to save money? Well, as stated in the introduction, we all earn millions or multimillions in our lifetime. The only rational way to see these millions is to save every single dollar we earn. There are three methods of savings to achieve your financial goals and secure your life for old age.

The most common form of savings and, sadly, the least effective method is the old school "money in a mattress" method. There is no interest to help your money to fight inflation or hopefully grow through compound interest.

This method is great for your emergency fund minimum of $1,000, but it will limit your ability to work your money.

(i.e., plan savings account with fees and charges or a shoe box. Anything under the rate of inflation.)

Long-term savings will outpace your mattress. Many of us don't account for inflation. Without a shelter (i.e., a savings account or retirement fund), you are losing money every year. The rate of inflation ranges from 1.52.3%. These aren't taxes you'll have returned. This is an absolute loss of value. A money shelter protects you from inflation. A credit union savings account will match the rate of inflation, while a retirement fund or index fund will overcome inflation with compound interest of 5-8%. Where do you personally want to see your money long-term 5 to 50 years from now?

I recommend doing it after saving your first grand and beginning to combat your debts. This will leave an open financial pathway for saving for retirement while not impeding your 24-hour lifestyle. Attempting to pay off debt while saving is possible, but it will absorb a minimum of 30% of your income to do both effectively. Doing this while investing will consume nearly 40-50% of your income. It's not recommended but can be highly profitable if you have great discipline and schedule events in advance to budget them.

What if you haven't developed the discipline to save money for 50 years yet? We all try to save money but feel plagued by unexpected events. This is why there are goal-oriented savings.

The purpose of goal-oriented savings is to create a dynamic appliance of wealth moving in adjustment to life. The reason I don't recommend attempting all three at once is that I don't personally know anyone with expendable income or who doesn't feel they need more money. The method is ideal for paying for a new car, rent/mortgage, a rental property, or for a musician to get studio time. It's potential energy. Your wallet becomes prepared to take action. It becomes easier to save money knowing there will be an eventual release of the funds or guaranteed security for the future.

It's best to have a $1,000 emergency fund and then work to stow away seven months of expenses for food, shelter, and transportation before adding seven months of your luxury expenses. This way, our financial decisions, and sudden circumstances are not controlled by fear. Instead, we can address our financial life with present awareness of the eternal. There will inevitably be a tomorrow. We cannot eat all our bread today. The aim is to teach you to bake your own bread or save up your dough.

Try these five exercises and share your results with us on Facebook!

1. Resolve to save 10-20% of all income you receive for at least one full year for up to five decades.

2. Get an online liquid money fund, a savings account, or a credit union to store your money for your financial goals.

3. Set 4 quarterly financial goals; give yourself a deadline to achieve these goals. Give yourself a fifth annual financial goal to prevent you from emptying your savings every three months. You are on pace to save this entire year from securing you for seven months if needed in the future.

4. Save for your first quarter (3 months), track all your transactions then adjust your saving habits for the following quarter. Repeat this for three more quarters until the fiscal year is complete.

5. Do you need to make any lifestyle adjustments to achieve your financial goals on time? Then convert the money you once spent on your vices are the first dollars that you save.

My last words on savings are quite simple. Investing will produce a greater yield for your income. Insurance will protect your family. To accomplish either of these goals, you must resolve to reallocate your funds from fun to priorities. This means even when you have money in your pocket, you have the fortitude to focus on the future. If one struggles to save, finances will always be a fundamental blockage in life because, at its heart, the struggle is delayed gratification. We will soon discuss Opportunity Costs. This will help you learn how to better delegate your money and time away from diversions. The goal is to focus on your craft or true enjoyment of life.

The fundamental skill of savings is so powerful it can change your life for good. Savings at a base level of 10% over your lifetime will yield a good amount. Savings at 20% will afford you to at least retire. At 30%, you can spare your children a difficult life. 40% and you may achieve wealth in your lifetime. 50%, and regardless of your income level, you'll never have to worry about money again in your life. Don't you believe me?  

I picked $12,500 because it was the average amount I made before I learned about money. I set my value so low before I applied basic math to my own existence. I could have never retired off such an amount. To think I would have only earn $615,000 while this is some guy's annual income for managing over labor instead of actually working seems insane. 50% of our time, energy, and focus will be absorbed into the quality of life, conquering our feeling of survival. If one is willing to apply their energy x focus over time, anything they wish will become obtainable.

Do you know anything else you might have done with a year working at $12,500 a year part-time? How could you double this income level? Do you believe even $12,500 a year annually is enough to begin investing into your life to eventually earn four times this amount?