The art of wealth creation by saving money is a hard one to perfect.
Lets face it, if it was really easy we would all be able to create wealth whenever we liked, with virtually no effort at all.
We would all be rich bythe age of 25.
It is obviously a lot more complex than just spending less, although this is one very important part of the overall equation.
The big questions you need to answer, straight off before you go anywhere at all, are these: What is your target total.
You must have a fixed amount What rate can you save at.
You must have a minimum amount you can save on a regular basis What frequency can you contribute towards your goal at.
You must know if it is going to be weekly, daily or monthly etc Where are you going to keep the money you save.
Bank, building society, credit union or other? What are you going to put in place to make sure you don't spend your savings When would you like to have the money by What are you prepared to do to accelerate your savings plan.
(part time work?) These are the questions to which, if you can answer them honestly and accurately, then you will have the makings of a savings plan.
All that will then be needed is some streamlining and self discipline in order to make it work.
Your plan might go something like this: I need $3000.
00 for a new car.
I get $640.
00 per fortnight, it costs me 540.
00 per fortnight to live (all inclusive of treats and everything) so therefore I can save at a rate of $100.
00 per fortnight I get 10% interest calculated daily at my local bank but I get 12.
5% at the building society across the road.
I am changing to the building society.
The control I am going to put in place, to ensure I don't spend my savings is that the account I open for this project is going to be a joint account which requires two signatures.
The other person is my father and he won't let me fail in life.
He is also extremely hard to influence I would like to have my new car by Christmas (6 months away).
At the rate I can save I will only have $1300.
00 and be $700.
00 short.
I will get a part time job, plus sell my spare bicycle and cds I no longer listen to in order to make up the shortfall And there you have it.
Now this all seems very simple, on paper, and it is.
Until you are the one who has to actually start doing these things.
Then it becomes a drag.
Now, what you really need is a way to MAKE money, faster than what you spend it.
This is as opposed to making money just for the purposes of having some left over to save.
Here the principle of paying yourself first comes into play.
Robert Kyosaki, in his rich dad poor dad book, has 2 flow charts which go basically like this: The first one.
I earn, I get taxed, I have a nett pay, I meet my expenses out of that, I save whatever is left over The second goes like this.
I earn, I pay myself 10% of my gross earnings first, I meet my expenses, I get taxed on what is left, and I bank the balance.
Obviously, in order to use the second method described above you have to be in business.
But that is the very essence of wealth right there.
Being able to live out of pre-taxed dollars is exactly how the rich get richer and the poor get poorer.
Lets face it, if it was really easy we would all be able to create wealth whenever we liked, with virtually no effort at all.
We would all be rich bythe age of 25.
It is obviously a lot more complex than just spending less, although this is one very important part of the overall equation.
The big questions you need to answer, straight off before you go anywhere at all, are these: What is your target total.
You must have a fixed amount What rate can you save at.
You must have a minimum amount you can save on a regular basis What frequency can you contribute towards your goal at.
You must know if it is going to be weekly, daily or monthly etc Where are you going to keep the money you save.
Bank, building society, credit union or other? What are you going to put in place to make sure you don't spend your savings When would you like to have the money by What are you prepared to do to accelerate your savings plan.
(part time work?) These are the questions to which, if you can answer them honestly and accurately, then you will have the makings of a savings plan.
All that will then be needed is some streamlining and self discipline in order to make it work.
Your plan might go something like this: I need $3000.
00 for a new car.
I get $640.
00 per fortnight, it costs me 540.
00 per fortnight to live (all inclusive of treats and everything) so therefore I can save at a rate of $100.
00 per fortnight I get 10% interest calculated daily at my local bank but I get 12.
5% at the building society across the road.
I am changing to the building society.
The control I am going to put in place, to ensure I don't spend my savings is that the account I open for this project is going to be a joint account which requires two signatures.
The other person is my father and he won't let me fail in life.
He is also extremely hard to influence I would like to have my new car by Christmas (6 months away).
At the rate I can save I will only have $1300.
00 and be $700.
00 short.
I will get a part time job, plus sell my spare bicycle and cds I no longer listen to in order to make up the shortfall And there you have it.
Now this all seems very simple, on paper, and it is.
Until you are the one who has to actually start doing these things.
Then it becomes a drag.
Now, what you really need is a way to MAKE money, faster than what you spend it.
This is as opposed to making money just for the purposes of having some left over to save.
Here the principle of paying yourself first comes into play.
Robert Kyosaki, in his rich dad poor dad book, has 2 flow charts which go basically like this: The first one.
I earn, I get taxed, I have a nett pay, I meet my expenses out of that, I save whatever is left over The second goes like this.
I earn, I pay myself 10% of my gross earnings first, I meet my expenses, I get taxed on what is left, and I bank the balance.
Obviously, in order to use the second method described above you have to be in business.
But that is the very essence of wealth right there.
Being able to live out of pre-taxed dollars is exactly how the rich get richer and the poor get poorer.
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