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In life, we often find ourselves running directly at a wall. This wall represents some difficulty that we must experience in order to grow and better ourselves. However, when we find ourselves in this predicament, we have 2 options: we can either run directly into the wall with our heads down (and find ourselves taking a long break from consciousness) or we can expound our energy and effort to get over the wall, bringing ourselves up to a new level and plain of existence.
Often times, when financial struggles come along in our lives, we can find ourselves in the head down position, hoping for the best.
When the anxieties of a salary that isn’t high enough, taxes, debts, and investment losses begin to pile up, it can be difficult in our financial lives to forge ahead.
However, what most people aren’t aware of is that there are many places in their financial lives they could be saving money. And the lack of planning makes their current struggles much more of a burden than they need to be.
I’ve been really intrigued by the book, “Money: What Financial ‘Experts’ Will Never Tell You,” by the founders of Money Mastery. In it, they tell a story of a man who was very much against tracking his expenses. He thought it was a completely stupid idea. Eventually, they convinced him to give it a try and promised him he would find extra money if he did.
Long story short, he began to track his money, and he found he was spending around 180 dollars a month on big gulps and other snacks on his way to work.
Now, that may sound like an easy solution, but it really worked for him. And I’ve seen this scenario play out many times in my life.
It doesn’t matter if it’s coffee, movies, snacks, or that occasional DVD you buy once a month, it all adds up to a lot of money.
So, what is step 1 in our saving money system?
1. Track Your Spending
Tracking the money you spend will give you a conscious realization of the money you are currently spending. Often times, however, people begin to cover their eyes when debts and hardships begin to pile up. They begin to hide from their finances, swipe the credit card, and hope that it doesn’t come back “card denied.”
Once you begin to track your spending, it will become increasingly more difficult to make purchases for things you don’t need.
Now, on this same note, what did Money Mastery tell this guy to do with his extra savings? Well, this is something I really liked so I want to share it.
They told him to take 20 percent of that money he was saving, and put it in a fund for things he wanted to buy, or as the book calls it, “emotional” purchases.
In life, we want to enjoy our time while alive and our money we are earning. So, setting aside money for purchases we want to make on the fly gives us the opportunity to buy things we want, but without going into debt for it.
Once we have established this “emotional” fund, then it becomes a question of “what do I want?” This means that you now have a decision, do you want to have a fancy dinner 1 time this month, or would you rather take the family out for McDonalds and a movie at the theater? You know how much money you have to spend, and you make a decision what you want to do with that money.
That brings us to step #2 in the saving money system.
2. Losing Money to Wealth Transfers
Once you have got a handle on your spending, you will start to see the other places you are losing money. This will all become much more clear as you begin track your spending (if you want a simple spreadsheet to track your spending feel free to email me and I’ll send it to you or I’m sure you can find one on Google).
However, many people, when they begin to track all of their monthly spending, will find they are spending massive amounts of money on their health, car, and other insurances.
Now, these are necessities to have. But, you probably aren’t aware of how much money you could be saving if you raised your current deductible. By raising your deductibles you can stash more money away into your emergency and savings funds. Eventually, you will have much more money in your emergency fund than is needed to cover the new deductible. However, don’t let that be a deterrent, continue to put money away in your emergency fund indefinitely.
Now, the other part of wealth transfers—and most often the most expensive part—is debt transfer. I don’t need to get too much into this (it’s obvious that if you pay debt down you will save monthly income) but it’s important once again to track all of your expenses to clearly see these wealth transfers.
Don’t forget that by paying down the debts with the highest interest rate first, you will save money much quicker.
So, we see now that saving money by tracking your spending coupled with saving money on wealth transfers will have a major impact on your future financial situation. This brings us to our final point in our saving money system.
3. Saving money normally lost to the market
This is a bit more complex, however the ultimate point here is that by investing smart, and by being aware of your current investment strategy, you can limit the amount of money you lose to market losses.
Personally, I’ve lived my life in a very risky way. I’ve always enjoyed bridge jumping, sky diving, etc. However, when it comes to my investments, I’ve always been very risk averse. I choose investments with guaranteed rates of return and no loss provisions.
But that’s just me, you may be a bit different. However, you would be amazed at number of people who throw their money into a 401k or mutual fund that they really have no clue about. I’m not telling you how to invest your money, what I am saying is be completely aware of all your investments and make sure that you are making a choice.
By limiting loss and securing growth you will find yourself planning a financial future that is not only stress free, but will give you the opportunity to enjoy your time with your family and friends until the end of your life.
Author Bio: Joshua Thompson is a Certified Financial Wellness Educator who utilizes wealth creation strategies, IOP, and infinite banking to help secure and create wealth for individuals and business owners.