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In this day and age of consumerism, money can so easily slip through our fingers like water. And if we are not careful, our hard-earned money can disappear in what seems like an instant. Commercials, magazine ads, the internet, billboards…they all tempt us with the promise of instant gratification.
Buy this, and you will be happy. Buy this and you’ll become more beautiful, or smarter or healthier. It’s only too easy to slip into the habit of spending all our money and then some. This is why, I’ve decided to be intentional in the way I manage my finances.
Most people use this formula in spending their money:
Income – Expenses = Savings
Then I came upon this formula while reading the book Think Rich Yuppies by one of my good friends (who happens to be an amazing author and speaker), Sha Nacino.
This is her formula:
Income – Savings = Expenses
If you spend first and save what’s left, there won’t be much left to save. So instead, save first. And then spend what’s left. This is called paying yourself first. To some, this maybe a new idea. How can one “pay” himself? The answer is, through saving.
Investing starts with saving.
You can’t invest if you don’t have any money saved up.
Think about it. When you receive your salary, you pay Rustans (when you go grocery shopping), you pay Globe, Jollibee, the tuition, electricity bills….the list is endless. But what about you? The one who earned this money? Don’t you deserve to be paid for your efforts as well?
Saving money is hard mainly because we feel like we never have enough to begin with. But it’s something we all need to do. My mom instilled in me the discipline of saving in grade school. Whenever I received my allowance for the week, I would immediately set aside a portion of it to be deposited in my bank account (yes, I had my own bank account in grade school).
Today, as a real estate broker (of Truly Wealthy Realty), I receive income in bulk. So I have to really discipline myself not to splurge and spend everything at once (no matter how tempting it may be). As I don’t have a regular salary, I need to find ways to make my money last.
Here is what I do with my money:
- 10% tithe
- 10% tax
- 20% stock market
- 20% forced savings (when this accumulates, I then invest the money elsewhere)
- 10% education fund
- 5% giving account (gifts, treats for my family)
I basically live on 25% of my income. Now if you are not accustomed to saving, you can start on saving 10% of your income every month. Then you can increase it to 20% later on. According to studies, to achieve financial freedom, you need to invest AT LEAST 20% of your income. That’s the minimum. So that when you are 60 years old and can no longer work for a living, you won’t have to rely on other people (like your kids or relatives) to support you in your old age. If you save 20% of your income and invest it in the stock market, bonds, mutual funds or other investment vehicles, you will have 10 million by age 60. You will have money to buy gifts for your grand children, medicine for yourself, maybe go on a cruise once a year… Now this is the life! But you can only have this life if you discipline yourself to start saving NOW.
Most of the yuppies I know look at me like I’m crazy when I say “I’m saving and investing for my retirement.” They go, “You are too young to even think about retiring!”
But the best time to invest for your retirement is NOW. Not in some far off future, not tomorrow, but today. Time can pass by swiftly. It’s better to prepare as early as possible so we can have the future that we want. Let’s practice delayed gratification. Let’s start paying ourselves first.
What about you?
Are you investing for your future now? There is no time like the present to start doing so.
Go live a Truly Wealthy life!