Learn how to start saving money and make it a lifetime habit. I’ve found the easiest way to do it is every paycheck. Every time you get paid, a rote percentage of your net pay is reserved for saving, not spending. Transfer that money out of your account and put it to work in a customized investment plan you design for each of your financial goals.
Be single-minded and hunt just one financial goal or pursue several at the same time. It’s up to you how you distribute your savings.
If debt elimination is the number one financial goal on your list, especially if its high interest debt, concentrate on that goal above all others. Temporarily suspend funding for other goals in lieu of debt elimination. You can get back to wealth building with gusto once that high interest debt is history.
Pay Yourself First
Starting with your next paycheck, save that rote percentage of your net pay. Once that paycheck clears your account, off that savings goes. If you’re first pursuing a debt elimination goal, that savings goes toward reducing the debt with the highest interest rate. Call this savings percentage your debt elimination percentage or come up with your own colorful nickname.
For other goals, that savings is directed into a customized investment plan you create for each goal. It puts your most important money, your savings, where it’s going to work the hardest for you. Call this life after debt savings your prosperity percentage.
If you have a retirement plan at work, more than likely this deducting, saving, and investing is done for you automatically. Be sure and count that percentage of your paycheck going toward your retirement as part of your prosperity percentage. It is, after all, going toward the one financial goal most of us share – a financially comfortable retirement.
I call this strategy paying yourself first because you’re favoring savings over expenses. It puts your most important money, your savings, to work for you faster. Over time, you’ll benefit from higher earnings on your investments using this strategy.
That’s how to start saving money. Begin with your next paycheck.
Living on What’s Leftover
Of course, paying yourself first can be perilous if you’re not able to live on what’s leftover, which is why you need to choose your savings percentage carefully. Consider tinkering with it a bit before enacting any plan.
Once your savings percentage is set, you’ve got to stick to it through thick and thin. You’ve got to defend that savings percentage at all costs! Don’t let some silly expense come between you and your debt elimination or wealth building.
Setting Your Percentage
So, what’s it going to be? You could settle for what I consider the absolute, bottom floor minimum of 10% of your net pay, but I suggest setting it higher. Much higher if you can afford it. Set it to 14%, 15.5%, 17% or maybe even 22.75%. Higher wage earners and the thriftier and more frugal among us can save 24%, 26.5%, even 30% plus!
I used fractions in my savings percentage examples on purpose. Even a one-half of one percent boost of your savings percentage can have a big impact on your wealth building in the long run. Regardless of your income, try and squeeze every dollar you can out of your savings percentage, and be sure to save it every paycheck.
What’s your savings percentage? No matter what your income, deciding what your savings percentage is going to be is an important decision. It will ultimately determine your future level of wealth. In the extremely near future, I’d like you to be able to answer that question with precision. This is how to start saving money. Start with your next paycheck.
If you’re taking my suggestion and getting rid of your unwanted debt first, before wealth building, I want you to get what I call debt desperate with your debt elimination percentage.
I want you to drastically, with desperation, slash your expenses to the very bare minimum in lieu of your debt elimination. Try and make more money any way you can during your debt elimination period too, whether it be a second job, taking on more hours, or selling stuff. Do all of this and more to boost that debt elimination percentage as high as you can get it. The more debt you’re trying to eliminate and the higher the interest rate, the more debt desperate I want you to be.
The reason I want you to be debt desperate is because the higher you can set your debt elimination percentage, the faster you’ll get out of debt and the more money you’ll save. Do it right and you’ll be out of debt in months, not years, which gets you back to wealth building that much sooner.
Boosting Your Percentage
Always look for ways to boost that savings percentage even higher. Got a raise? Keep your expenses fixed and raise that percentage. Receive a bonus, tax refund, inheritance, or other financial windfall? If you’re debt desperate, use it to reduce the principal balance of your highest interest debt. Otherwise, put it toward the financial goal that’s number one on your list.
Work on the other side of the how to start saving money equation too. Besides boosting your income, always look for ways to decrease your living expenses in lieu of your savings percentage too.
Start Next Paycheck
Now that you know how to start saving money, I hope you get started with your very next paycheck. Make saving a lifelong habit.