Money Walks

A budget is really nothing but a spending plan.

You may find yourself struggling with an unrealistic plan to save tons of money when what you really need to do is spend more wisely. If you think that you can meet your financial goals without some sort of a spending plan, you will find yourself very disappointed. Regardless of whether you make a hundred dollars a week or a million, the key ingredient to successfully making your money work for you is to create your spending plan.

The problem is that many people spend more money than they make and they don’t realize they’re spending too much until its too late and they’re deeply in debt. What you want to do is to decide in advance how to put your money to use instead of letting it happen accidentally. When you spend without some sort of a spending plan, you are not in total control of your money. In other words, your money is in control of you.

The driving force to keeping a spending plan, or budgeting, is all in the attitude. You want to think of budgeting as eating right rather than being on a diet. You eat what you want in moderate amounts, you don’t binge, you don’t deprive yourself, and yet you end up better off. The word budget, for some, creates images of sacrifice, penny pinching, and doing without the extra. I want to say that 90% of budgeting is mental, so if you find yourself overwhelmed when you hear the word budgeting, then you want to replace the negative image with a positive one.

Remember, the key ingredient to successful budgeting is a positive attitude.

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Raise your hand if you think saving is a good idea? Now out of everyone who raised their hand, keep your hand up if you actually save. Here is where almost everyones hands go down.

When you ask anyone to save a certain amount of their pay check, they will most likely agree that it is a great idea but they claim they can’t because they’re already pushing their limit within their budget. To save money from your current income will mean reducing your standard of living and that may be moving into a smaller place, not driving a fancy car, eating cheaper foods, or not able to enjoy your daily morning Starbucks. But because peoples lifestyles are all built on habits, even if they can agree that saving may be a great idea, the actual thought of reducing ones lifestyle is so unacceptable that they are not able to discipline themselves to take the first step.

Believe it or not, saving has always been a part of your life. When we were all growing up, we were given allowances and also were encouraged to save our money. Back then, we looked upon money as a tool to buy happiness whether it be in forms of toys, candy, ice cream, or cookies. Therefore as a result, we also naturally begin to look upon saving a way of punishment, which means depriving ourselves from the toys, candy, etc. At an early age, people begin to associate savings with pain, sacrifice, loss of pleasure, satisfaction and happiness. Now as adults, this habit is manifested in our desire to want to spend money as soon as we receive our checks.

Well instead of telling you how you can overcome this habit or cutting back on your current lifestyle, heres a different route. From this day forward, you need to save 75% of every increase in pay you receive from work.

How does this work?

This is something that you can do because it does not require you to lower your current standard of living, in other words, you don’t yet have the money built into your daily lifestyle. It is easier for people to commit to saving money that they don’t have than for people to agree on saving by cutting down on their current lifestyle. In order to become wealthy, you need to develop these habits.

So starting today, commit to save at least 75% of future raises in income. The earlier you start, and the rate at which your income grows, saving 75% of your future increases in years to come will allow you to acquire an enormous amount of money. Developing this habit will eventually make you financially independent.

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Lately, I’ve been listening to this audio book called the “Automatic Millionaire” by David Bach, and let me tell you that it’s awesome. I recommend this audio book to everyone, it’s a great read/listen, whichever you prefer. So while I was listening to it, I noticed some cool things that I thought I wanted to share with you.

When it comes down to it there are 6 approaches to wealth. Here they are.

1. Win it. For example, the lottery. Did you know that over 500 Billion dollars have gone into the lottery business since the early 70’s when the lottery was first started? Imagine if all that money was put into an investment account, there would be over trillions of dollars right now. This is not a realistic approach but it happens to the very few. Do you know anyone who has won the lottery? Probably not, so I wouldn’t recommend waiting around for this one.
2. Marry it. Wouldn’t it be great to marry your self into wealth? But lets face it, it’s not that easy to marry for money. Not only is it not easy to marry for money but “when you marry for money you pay for it for the rest of your life”. Good luck with this one.
3. Inherit it. Now inheritance is actually a real approach to gaining wealth. Within the next 15 years, we’re going to see over 15 trillion dollars transfer from one generation to the next. But I mean, who wants to rely on their parents to past away so that they can get their money. No one I know, hopefully no one you know either. If you are fortunate enough to have your parents or family members leave you something after they pass, you can be grateful but don’t depend on it. Not a good way to live and you don’t want to rely on this for your retirement.
4. Sue for it. Why work when you live in a country that pulls in 90% of all lawsuits made in the world? Just sue your way into wealth, right? Wrong. Again, you don’t want to rely on something like suing someone to get rich. This is not a real approach to wealth.
5. Save for it. For all the little things we spend our money on like fast food and starbucks, this alone over a long period of time could end up to be a considerable amount. Say you spend on average roughly $10 for lunch and starbucks. Over a year it’s $3,650 and over thirty years it comes to 109,500! Now imagine you put this money away in the stock market in some kind of an index fund, which historically averages about a 10% return. Using this compound interest calculator, you would end up with 660,443.50! Isn’t this amazing? So yes, your daily fast food and starbucks is costing you over half a million dollars. This is also known as the Latte factor.
6. Earn it. Yes, you can earn your way into wealth. Although the automatic millionaire has many great tips on how to accumulate wealth, the main concept of the audio is to pay your self first. What does it mean to pay your self first? It means that when you get your paycheck, before you pay anything or anyone, including the government, you make sure to pay your self first. When you automate this process electronically, it’s very easy to do because you don’t have to do it manually and the great thing is it doesn’t require motivation or work once its all set up. This is why out of all the 6 approaches, this is the most promising. As Bach mentions in the audio, you can start paying yourself as low as 1% of your gross income. Then over time, slowly start to increase your percentage and you won’t even notice it.

Just to let you know, I’m not getting sponsored or getting paid for saying any of this, I just want to share with you how much this program works.

So ever since I started listening to this audio, I made everything automatic and so far it’s doing great. As of now, I am automatically paying myself 20% of my gross income each paycheck. I stated out with 10% but then realized that I can afford to do 20%.

Having this process automated is the main key. Since it’s automated, you don’t have to worry about keeping your self motivated and that’s a huge factor, especially for me. Lets face it, it’s really hard to stay motivated 24/7 and thinking about finance day in and out. Another thing is when you have this process automated, once you have everything setup, you don’t have to work at it. Everything is automatic! It’s working for you while you’re not thinking about it.

The thing is, most of us know the concept of paying yourself first, but no one ever executes them. In his book, he pays down solid principles and honestly tells you that it’s not a get rich scheme. That it takes years for it to work. But its a solid plan that I think is guaranteed to work. What I like about the book is that it’s really simple to understand and easy to follow. If you have the chance, go check the book out for your self. It’s definitely worth the investment.

I have a friend who has been keeping his receipts for as long as I can remember. I guess you can say that he’s a receipt freak. He keeps them to enter into his money tracking system to keep track of his budget.

This is all very understandable and some what commendable for being so organized but I asked him, “why not just use your debt card like I do and keep track of your spending that way”. He replied ” because I like paper and I like to organize them!”

Apparently, he keep them filed away in a very organized folder on a monthly basis. I was amazed.

What did I learn? I guess there are people who just likes to keep their receipts and hold on to them.

So for all you receipt lovers out there, here are some tips I want to share with you on proper receipts handling skills:

1. Establish a simple routine for dealing with your receipts as soon as it comes into your hands and stay consistent. You can for example leave a space in your wallet or purse just for receipts and every time you purchase something. When you get back home, immediately put the receipts into an organized folder. This way, you don’t have to think about where you put your receipt and don’t have to waste time looking for them.
2. As soon as you receive your receipt, look for missing or faded information and fill in that spot immediately. There’s nothing more frustrating then trying to read the receipts’ date or price long after the fact when you’ve finally gotten around to putting into your data entry.
3. For those of you who likes to fold your receipts, fold it so that the printed side is uppermost. This way, it will be easier to find the receipt if you ever have to look for it. When you fold a receipt so that the printed side is hidden, all receipts look alike and you’ll have to unfold them all to find what you’re looking for.
4. Don’t let the data entry pile up. It’s a good habit to schedule a time every week to do the necessary data entry and make sure to stick to that schedule. If you don’t, you’ll find your self just putting it off and your piles of receipts will become even more ugly.

I hope these tips can help you out some way or another. Keeping track of your receipts is really nice and handy, but the trick is to being able to keep them organized. Good luck, I think I’ll stay with the online statements

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For the majority of the population, most people have bad habits when it comes to money. These people, instead of thinking in terms of saving, investing, and financial freedom, they think only of spending, borrowing, and financial dependence. Statistic shows that in 2002, nearly 2 million Americans declared personal bankruptcy due to constant spending and borrowing more than what they could afford.

There are two directions that a person naturally goes through with regards to finance.

One road leads in the direction of earning, saving, investing while the other leads in the direction of earning, spending, borrowing and then getting into debt. Each person is responsible for their own actions and they have to make the decision on which road they are going to take.

For those who are in debt, the great news is, regardless of what road you have taken in the past, you have the ability to decide what road you want to take starting from this day forward. Accept complete responsibility for your financial life and take the first step into the right path.

The fact is, financial success is long-term success.

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Yes, I’m really excited to announce that I have completely paid off my credit card as of this past weekend. I have wrote many posts about my credit card situation and it has been an ultimate goal for a while now. I am finally glad to announce that my long journey has finally reached an end.

For those who do not know, I originally had a credit card debt of about $9,000.00 as of last year May. Over this past year I have been trying really hard to fight temptation to not buy anything that I don’t need and only worrying about paying off this debt.

So now that it’s finally paid off, what’s my next goal? What am I now going to do since my debt has finally been paid off? It’s simple. Save, save and save. Invest, invest, and invest. That is going to be my next goal. Over this past year, paying off my debt has definitely been a great learning experience and through the process I’ve learned to budget effectively and to live frugally.

Now my main goal is to save up for my down payment for my first home. I plan on purchasing my first home in about 3-4 years from now, so I have plenty of time to start saving. I live in Maryland and houses here are quite expensive. If I want to save for a 20% down payment, I’m going to need about $70,000. That’s going to be my next 4 year goal.

Having this credit card debt paid off has relieved a lot of stress off my back and now I’m ready to continue my financial journey.

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