How to stop wasting money
It’s not what you earn that is important. It is how much you can save.
It’s easy to spend your way out of a fortune. Fortunately, the opposite is also true – you can save your way into your first million. Most working people will earn well over $1 million during their working lives. The secret to saving $1 million lies in keeping more of what you earn. Just as increasing your earnings offers a unique perspective, reducing your spending is a principle means of saving.
If you took the $5 every day that you would normally spend on coffee, snacks, etc., and invested it instead in a quality mutual fund earning 8 percent per year compounded over 45 years of your career at an 8 percent rate in a quality mutual fund you would have accumulated a final savings balance of: $518,560.44. That is the first $518,560.44 of your first million. Something to think about the next time you step out for lunch. Seen in this context you can understand why spending less is a founding principle in the concept of attaining wealth.
Frugality means living within your means
Most millionaires are frugal. They live well within their means. Many people think that millionaires all live in luxury, drive expensive cars and own big mansions, wear designer clothes and dine in popular restaurants. This is not the case. Millionaires know very well that if they did this, they will not become rich. Because then, they would not have saved their money.
When you do have to spend, try to get the most value for your money. If you shop for what you need and buy it cheaper than you’d planned then that’s a great deal. By keeping the end use of large purchases in mind, you can avoid this drain on your cash.
Since housing is the largest monthly expense for most people, finding a way to eliminate this expense, even for just a few years, can help you save a large sum of money. Living with relatives, live-in work arrangement or living in a portion of a property that you own and rent out are all good ways to accomplish this savings feat.
Vacations, autos, children and all of life’s other expenses take a big bite out of your paycheck. Plan meticulously for these events. To maximize your savings, you need to minimize your spending. Buying a home you can afford and living a lifestyle that is within your means and not funded by credit or credit cards are all necessary to reach financial security.
Never carry a balance on your credit card or take loans for frivolous items. Paying interest for unnecessary loans is a cancer eating away at your savings potential.
While it may be necessary to borrow for a mortgage, car loan or college tuition. These are big ticket items. Investing in one’s education can increase your earnings potential.
Decrease your spending to essentials that you really need
The best way to increase your disposable income is to protect the money you earn by spending less. Tightening your budget will take some effort in the form of sacrificing a few luxuries, but the increase to your disposable income will not require longer hours at work or incur any extra tax. The more after-tax dollars you hold onto, the easier it is to do things like investing to secure more income in the future.
Spending less is something anyone can and must do if you desire to become a millionaire. Earning more may help you, but spending less is the only iron-clad solution to the problem of living paycheck to paycheck and never having enough.
Of all the ways to increase your disposable income, the simplest one by far is spending less. Spending less and saving more. Working longer hours or taking a second job will not get you any further if you spend the extra earned income.
Keep track your income and expenses
Make a budget. This is a must do. You need to be serious in dealing with money if your goal is to be a millionaire.
It does not matter how you track your incomes and expenses, you can jot them down in a note pad, in your diary, or even into your mobile phone. The key here is to make it a habit. This is the Millionaire’s Mindset.
Make a plan and identify your goal
Stop wasteful spending
Acquire a good education
Find quality employment
Savings and investments
Buy your first home
Buy adequate insurance
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