Establish a Savings Habit
Do you know a person with money? I do. In fact, I know him personally. He has read all the books on personal finance and attended all the seminars, workshops, and private coaching meetings. He has read The Richest Man in Babylon, Think and Grow Rich, Rich Dad Poor Dad, and a host of other books. Why didn’t he develop a savings habit?
One day this young man was with his tax guy and his tax guy yelled at him. The tax guy said, “You made a six-figure income last year and what do you have to show for it… NOTHING!” The young man was speechless. What could he say? He knew he was not smart with his money.
I know the young man because it was me. It doesn’t matter how much money you make. Blue-collar workers and athletes lose their money. Entertainers go broke, business owners go broke, and everyday professionals lose their money. You chide how athletes blow through millions of dollars in a few years and file bankruptcy. You say that if you had that much money you will never be broke.
Truth be told, if you can’t manage your money now, you couldn’t manage the millions the superstars have. Now this is not due to a lack of information. There are plenty of personal finance books, classes, and systems out there. You know you should have an emergency fund, a savings fund, and investing fund. Delayed gratification is a loss. You know you shouldn’t be going into debt and spending all your money. But you still do it.
Don’t Go Broke
I know about paying yourself first. But I never did. I would spend because I thought I could make more money later. You may have that same problem. But when the real estate market crashed, I did not make any sales, lost my corporate job, and I had no savings. I cashed out my 401k and burned through that six months later.
According to statistics 76% of people who receive large lump sums of money file bankruptcy. From my experience working with other entrepreneurs, real estate agents, independent contractors, and employees. The most successful people in their fields develop a habit of saving. They always pay themselves first.
I remember Chris Rock saying that everyone loses their first big money. You have to learn from that lesson. I was in denial when my tax guy lectured me and I decided to change. I was going to be smarter with my money. You have read the personal finance books, I assume because you are reading this article. But now you need to take action.
Here are four simple steps to develop a savings habit:
1. Find out where your money is going: Your checking account is a tell-tell sign of your lifestyle. I can look at your bank statement and guess what kind of person you are. Get control of your spending now. You may need some professional help. Again we don’t suffer from a lack of information. It could be as simple as getting personal financial software or going to credit counseling. Find out where your money is going and stop bad spending habits.
2. Develop a Savings Habit: Start a savings plan now. Even if it is $5 per week. Open up a separate savings account and start putting money in. This will be your emergency fund. Make your goal at least $1000. People go into debt and lose their cars, and homes because they did not establish a savings habit. They don’t have the money to survive the tough times.
3. Reward Yourself: Set up milestones and reward yourself for hitting savings goals. Please don’t spend your savings money on rewarding yourself. Treat yourself and watch your savings grow.
4. Eliminate Debts: It doesn’t make sense to have savings and still are incurring debt. Attack debt at the same time. Put a portion into savings and a portion to pay off debts. Some people ask why don’t I just pay the debt off first. As I mention earlier you need to treat yourself.
The Reason Why
Debt payments have a high-interest rate. Your savings have a low-interest rate. This is why we are establishing a savings habit and eliminating our debts. Doing both gives you the money for emergencies and you will be debt free. Now you can add your debt payments to your savings account.
People who establish a savings habit are ready for emergencies, they don’t have to go into debt, and they are ready when investment opportunities arise. Plus a savings habit shows self-control and you may be able to get all the funding you need to start a business. Please Establish a savings habit.
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