Saving money is one of the least fun parts of financial education. While it may not be very exciting, it is by far one of the most rewarding financial practices in the long run and is essential for someone serious about their financial future. It is something that you are probably aware that you should be doing, but it is important to ask yourself the question, “Do I have limiting money mindsets that are holding me back?” To answer this question, keep these 4 principles in mind when approaching this topic.
Spend less than you earn
Everyone has heard the simple statement “Spend Less Than You Earn” – it can sound deceptively easy. However, all it takes for most people is walking out the front door to find that life gets in the way of putting this into practice. Exceeding your monthly income is a sure way to land in trouble. This principle holds true no matter how much money is coming in – if more goes out than comes in, your balance sheet will land in the negative. Living below your means is the hardest habit to develop when it comes to managing money. Like any habit, putting it into practice over time makes it much easier.
Delay instant satisfaction for future goals
Achieving financial goals often looks like sacrificing today to reap long-term gains tomorrow. It is important to consider making a conscious decision to invest money for the future that could be used to purchase nonessentials today. For many people, retiring when they can be active and enjoy life is a priority. In order to reach this goal, it is essential to have a plan in place. Short-sighted thinking and excessive buying habits get in the way of setting money aside to be invested for the future and the results can be very damaging. “Keeping Up with the Joneses” is one of the reasons so many are in financial trouble right now. People try to emulate those who they think have it all and buy things they cannot afford in order to look good on the outside. It is possible that the neighbors who seem to “have it all” can’t sleep at night because of how much debt they are in. Doing what is right for your financial situation (and not someone else’s) will lead to setting priorities in order.
Avoid self-sabotage to ensure success
We all have areas in which we lack some control – recognizing these roadblocks and avoiding self-sabotage is another practice that leads to success in areas other than just finances. Those who are successful with money put themselves in situations that help them succeed. It may be tempting, and even thrilling, to invest a large sum of money in the newest stock but most successful investors realize while this may work occasionally, most of the time it does not. Successful investors use the method that has led many to financial prosperity – investing a set amount each month in mutual funds over a long period of time. While this practice may not generate interesting talk at a cocktail party, it is the path that most people have used to build their wealth.
Don’t panic, be patient
Having patience can seem to run directly against one of the habits that often leads to financial success – being driven. However, sometimes waiting and letting things play out the way they are supposed to can be the best possible move to make. Oftentimes, the only thing left after putting the right steps in place is to be patient and see how it works out. This is how many people retire with a sizable nest egg; they invest a set amount of money every month for years, and after thirty years, their patience pays off. They do not try to time the market and speculate on the next big thing; rather, they are willing to wait and let compound interest work its magic.
Below are some quick tips to get started:
- Track where your money is going & cut spending accordingly
For one month, track every penny you spend. You can do this many ways. If you are Mentoro member, you can do this in your portal! You might be surprised at how much you spend on little things. For instance, the average meal commercially prepared meal is $13, and if you buy lunch during the work week this totals up to an average of $3,120 for the year! Alternatively, the average home-prepared meal is $4, increasing your savings by 325%!
- Prioritize what is most important
It is important to distinguish between our wants and our needs. Sometimes we feel we need certain items when, in fact, they are just wants. For instance, while that brand-new sweet car might feel like a need, in a list of priorities it falls below buying a home. No one can have all they desire at once, especially when beginning to build wealth. It is crucial to make decisions based off your financial goals instead of making impulse purchases that delay financial progress.
- Look into other options
If you know you have a project or event that requires a large purchase, explore options for borrowing the necessary item rather than buying it. For instance, if you need a particular tool see if you can borrow it from a friend before purchasing it. Or if you have an event that requires a new outfit, consider renting through an online clothing rental company to save money and increase your sustainability.
- Try unconventional spending strategies
Studies suggest that spending cash feels more costly compared to swiping a credit card. For some who struggle with overspending on a night out, bringing your budgeted amount in cash is a helpful way to ensure that does not occur. Don’t be afraid to try unconventional approaches to ensure that your budget is being followed.
See if you can implement some of these tips to help you start saving today!
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