Key Takeaways
- Save first, spend second.
- You can’t start a good saving plan (or habit) until you’ve established a budget.
- Increase your income, reduce your expenses and control your emotions—wait 48 hours before pulling the trigger on a major purchase and don’t fall into the FOMO trap.
Some of you may have read Charles Duhigg’s book The Power Habit, in which he talks about keystone habits. A keystone habit is one in which everything else flows. A good example of a keystone money habit is to save first and spend second. Now, if you’re having trouble saving money, I will walk through several ways to do so, but first you must make sure you’ve established a budget. At its core, a budget boils down to what you have coming in and what you have going out. You should either write it down or store it conveniently online.
The three ways to save are:
- Increasing your income
- Reducing your expenses
- Controlling your emotions
- Increasing your income. You could get a raise at work, or you could move to a higher-paying job and/or you could get a side gig with Uber or freelance clearinghouses such as Upwork or Fiverr. Whichever route you choose, strive to save 50 percent of your income increase.
- Reducing your expenses. First, plan out your meals for the week and bring a bag lunch to work every day. Next, get rid of cable. Get rid of the health club. Look at your car—can you sell it and get a newer used car with a lower loan amount? That could be huge. VERY IMPORTANT: Pay your bills on time. It will increase your credit rating and your FICO score. Paying your bills on time also reduces your interest expenses. Look at your list of wants. Can you eliminate any of them? Also go online—you will find thousands of tips for saving a dollar here and a dollar there.
- Controlling your emotions. If you’re planning a major expenditure, wait 48 hours before you finalize it. Let that emotional “warm wash” go away so you can make a really good, smart decision. Next, don’t fall prey to FOMO (Fear Of Missing Out), instant gratification or going on a spending spree. All of these emotional traps will just mess up your budget. Finally, check your budget every week to see if you’re on track. That’ll keep it at a top-of-mind awareness.
Until next week, enjoy.
Gary