Written by Dave Young, President
We have 24 hours in a day to do whatever we want with our time and money. No matter what we do, the clock keeps ticking.
In order to make the best decisions with our time and money, we need to make goals and have a plan.
In order to build a reserve of money for the future, I suggest making these four goals.
1- Manage & Reduce Debt
Debt can get out of control and we need to make sure we manage our
current debt. Make sure you know exactly how much debt you have and take
steps to reduce it.
2- Get out of Debt
It will take time to get out of debt, but it is possible. Take small steps to reach your overall goal.
3- Build a three month reserve
You never know what will happen. I suggest building a three month
reserve. Don't live pay check to pay check. Put money aside so that you
could live for three months if something were to happen.
4- Invest for the future
Start investing for the future today. Open a savings account, add to your retirement plan through your work, open an IRA, etc.
Budgets may not seem exciting or even interesting, but they are the key to making your finances work.
A good example is when you make a goal to stay in shape.
You can't get anywhere unless you start with a goal to know where you are going. Then, you must have structure in your eating and exercise. You can't just do whatever you want and hope you will get in better shape. Finally, you must exercise a lot of patience and persistence.
Do you realize how much money will go through your hands over the next 40 years?
$20,000 a year= $800,000 (save 10% and invest at 10% return, you will have $885,000 saved)
$40,000 a year= $1,600,000 (save 10% and invest at 10% return, you will have $1,770,000 saved)
$60,000 a year= $2,400,000 (save 10% and invest at 10% return, you will have $2,656,000 saved)
It is important to take notice of where our money is going on a regular basis. Is it going to provide for our wants or our needs?
Teeter Totter Example
If you put your income on one side of a teeter totter and your needs (groceries, utility bills, mortgage, etc.) and wants (dining out, entertainment, new clothes, etc.) would the teeter totter be balanced? If not, it's time to reevaluate.
Money doesn't make you happy, but it sure helps your
situation if you stay within your means and don't go into excessive debt. People are happy at all levels of income. If a person makes $40,000 a year and saves $5,000 they are probably happier than a person
that makes $250,000 and spends $300,000. It is all relative.
The level of control over the resources (or money) that a person has does have a direct impact on happiness. The key to that control is developing and following a budget. This will help you build wealth over time.