Do you dream about becoming financially free? I want to get savvy with my wealth. To build it and be financially free. Join me on my journey, share your thoughts and experiences, and build our wealth and see if we can become millionaires one dollar, share and house at a time.
How do I begin saving my income?
The difference between rich and poor is the difference between income and expenses. If you have something left over from your income each month to put aside, then I’d say you can consider yourself rich in a sense. Would you like to save more money? How about 25% more? I know I would, and that’s what I plan on doing over the next 12 months.
How much of my income can I save?
Saving 25% of your income may seem impossible at first. But break it down to baby steps, and you’ll find it’s quite doable over time.
Start saving 1% of your income today and finish with 12% within twelve months.
Let’s start small. Not everyone can save that much cash, nor does everyone want to. Some people like the idea of spending money and treating themselves. They work hard; after all, they deserve it. But they don’t realize that instead of paying themselves what they deserve, they’re paying everyone else and having nothing left over.
So I’ve decided to set myself a challenge. I want to be saving 12% of my income in one year, that’s only 1% each month. I started my challenge with my first paycheck in January. I started with only 1%. So, it was easy, saved 1% percent of my income every month. I have automated, so by the end of the year I reached my goal?
Easy-peasy!
Next year I plan to save four percent every month. That’s a lot of money in a year. With each pay, I will increase my savings by 4% of my income. I’ll start in January with a 4% savings rate. How awesome will that be?!
It’s not much. But every month my money will grow. Simultaneously, I’m learning to live off less money. This way, I’m not going crazy and going cold turkey. It means I can slowly build up my savings rate and still finish the year off with several thousand of dollars in the bank.
It’s not always easy, though. I need to be conscious of my spending as it’s so easy to dip into the savings account. A better way to do this would be to have an account that either charges for withdrawals or you can’t withdraw from for at least 12 months.
The first four paychecks were more effortless, and now things are getting tougher. I need to be a little stricter in my budget as time goes on. I’ll need to stick to my goals.
But here’s the thing. I’m working towards earning more too.
I’ve increased my income in my day job. This will automatically increase my savings rate. I’m working on writing books, freelancing, and blogging. The money I earn from these avenues will go back to funding my side business and savings. 20% tax, 30% business, 50% savings. Starting a business costs money.
What if you get paid monthly? You could still be saving 12% after one year. Or, if you can, you can simply increase your monthly savings by 2% and end up with 24%.
Say, for example, you’re earning $4000 per month. You start at 1% in month one and continue increasing by 1% until you get to month twelve. In this example your savings might look something like this: $40, $80, $120, $160, $200, $240, $280, $320, $360, $400, $440, $480. You’ll finish the year with $3,120. How much difference would that make to your life? Aim for a 2% increase, and you’ve doubled your savings to $6,240. Much easier than starting at $260 or $520 from month 1, isn’t it?
We’re in April, and I’ve just reached 6%. It’s not groundbreaking, my savings balance is still low compared to some, but it’s growing. Slowly but surely, I’m getting the hang of this savings habit, and I love it.
Why Are You Still Living Paycheck To Paycheck?
Why are you still living paycheque to paycheck? I should probably ask myself that question. I’m saving. I’m paying off a mortgage, paying off a credit card, and it feels like I’m living paycheck to paycheck. The small steps are not significant enough to make me feel comfortable in my finances – and that sucks!
I’m a hard-working person. Whenever I set my mind to do something, I do it. I am an over-achiever, except when it comes to my finances. I like the finer things in life. I don’t have a problem spending $11 for a glass of Sauvignon Blanc if I get to enjoy this view.
When it comes to my finances, I find it hard to gain any traction. I take two steps forward and one step back. While that’s still moving in the right direction, it’s just taking too damn long.
It comes down to all the mistakes I made in the past ten years. I’m still trying to get a break. I’ve always worked, but I didn’t prioritize the important things.
Priorities – Income – Spending habits
These are the three things that cause the ‘paycheck to paycheck syndrome.’ To change it to the, ‘i’m financially free syndrome’ which is a good one to have, is to do the following;
Figure out your financial priorities
Increase your income
Clean up your spending habits
Simple, not necessarily easy.
I want to live a location independent life. To do that, I need to earn more from side hustles, spend less on crap.
Unfortunately, my needs are a little mixed. I want location independence, but I also want a nice house for my son to grow up in. You can say that I want it all.
Fortunately, it’s possible to get most of what you want if you work hard enough.
At the moment, my income is not good enough to get what I want. But I’m working on it.
Books, websites, blogs, freelancing. That’s how I hope to make $100,000 per year, eventually.
- Step one is to shift priorities.
- Step two is to increase my income.
- Step three is to clean up my spending.
The goal for the rest of the year!
- Eliminate credit cards (They suck!) ($5k) due by the end of June!
- Make an extra $500 per month principal payment into our mortgage (That’s an extra $6000 per year to pay off of our mortgage!)
- Create my freedom fund (shares! Growth and Income!) (aim for $5k by year-end)
- Grow this blog (future income stream!)
- Pay for a European vacation with money earned from side hustles (need $2-$6k)
- Save 25% of my income by year-end!
How to save to become a millionaire?
Nowadays, being a millionaire doesn’t have the same status as it did twenty or thirty years ago. With average house prices in most capital cities fetching around half a million dollars, anyone can become a millionaire within their lifespan.
As an avid reader of property investing magazines, each month, I read stories about people in their 20s, 30s, 40s, and beyond owning real estate over $1,000,000 big ones. They didn’t start out rich. Several started as teenagers working at McDonald’s or on the check out at Coles.
Hence my belief that anyone can become a millionaire. But not everyone will become one.
We’re a consumerist society that wants everything instantly. The concept of delayed gratification has become foreign to us. So, instead of paying ourselves and putting saving for investments and grow our wealth, we instead feed everyone else’s pockets first, from the groceries at the supermarket, to the credit card bill for that holiday last Christmas, to a new dress that you don’t really need because you’ve got five similar ones in your closet.
We spend money like it’s going out of fashion. I’ve been doing it myself for years. I’ve had enough.
My theory is that if you have a job if you are willing to make a few sacrifices along the way, have your wits about you, you can become a millionaire without having to stomp on any toes. After you become a millionaire, imagine how much good you can do by giving back to your community.
Don’t be fooled by baby steps. They can lead to more success than giant leaps, especially when you want to create a lifelong habit rather than a short-term fix.
