If you take action now and begin practicing the following simple principles, you may very well be on the path to less financial worries, more leisure, creating wealth, and contentment in your overall life.
Pay Yourself First
A fool and his money are soon parted. -Thomas Tusser *don't be that fool*
From every paycheck, similar to how you pay your taxes. Ask your employer (if possible) to deduct at least 10% of your gross paycheck and to deposit them on a savings account. Preferably one in which you will have a very difficult time accessing. For example, a small bank that has few branches and that is far from where you live. You can also add an additional barrier by putting a withdrawal limit. All of these steps will likely help you not touch the money.
Another great option is to begin a 401k with your employer if the offer it. Here you’ll have tax benefits, employer contribution benefits, and also some barriers (penalties) to limit you from touching it. An IRA is another option, that may help you lower your present tax burden now or later.
Use The Rule Of 72
Simplicity is the ultimate sophistication – Steve Jobs *let's always keep things clear and simple*
Hopefully within a year or two, you’ve accumulated some savings. For example $10,000 or any amount other than $0. At this point, depending on your income and other variables, you’ve realized that your lifestyle has not truly been affected by this easy form of saving.
However, the psychological benefits which you are now experiencing, are priceless. You no longer worry about most emergencies that may arise, your bills being paid late, etc. This along the understanding that savings is actually simple are priceless benefits.
Now or eventually when you do have savings, you can either waste it, leave it under the mattress where it will likely lose value due to inflation, or invest it wisely and see it grow.
I cannot give investing advice but let’s say that you’ve found a way to grow your $10,000 at a 10% rate per year. Well, at this rate you can use the rule of 72 to predict how many years it will take for your initial investment to double. That is 72/10% = 7 years 2 ½ months. Now that sounds like long time, and it is. However, the magic happens when the growth is compounded.
Jahaziel Rueda CHHC,CPT,CES AADP
-Expert in nutrition, basic anatomy and physiology.
-Owner/Trainer at Vita Nova Nutrition and Fitness