Every single person on this planet has their own employee, everyone!
Start to think of your future self as your employee. Just like every other employee out there, you need to make sure you are paying your employee. Whether it’s $5 or $500, the only way you can get yourself into financial freedom is by making sure you are keeping your employee well paid!
The process of saving begins a self fulfilling prophecy of future financial health and happiness! Eventually you can break the cycle of living paycheck to paycheck, of having to get creative with credit cards, or bills, to make sure you can pay everything on time every month. You know how stressful bills can be, and in a later post I will discuss how to fit those bills into a budget, think about how much less stressful it would be to know you have enough money to cover those bills no matter what?
Think about it: Who is more important to you? The cable company, your car, or yourself? Of course the answer is yourself, so why aren’t you paying yourself first? With the technological developments of the past decade it is now easier than ever to save. You can set it up so that automatically money is taken out of your checking account and put into your savings account without even having to think about it. If you haven’t started, or fear not having enough money, start small. Start by having $5 every week transferred from your checking to a savings account that is linked to your checking account. Then if an emergency arises and you absolutely need that money, you can easily transfer it back (highly not recommended!). Once you learn to live without that $5 every week, look to make it $10, then $15, then $20 and so on, until you are saving 10%-25% of your paycheck every month.
Once you have built those savings, see my post on Emergency Funds, you can begin investing and growing your money. Putting your employee to work only makes sense right? This will being the process of getting out of the monthly cycle of not knowing if you can pay all your bills, because you know you have everything covered in case of an emergency (peace of mind right?).
Another way to think about it is to start spending forwards, not backwards. What this means is spend the money you have, not the money you will have. Planning on taking a trip in a few months? Make sure you have the money in advance, not putting it on a credit card that you hope to be able to pay off before the interest balloons the payments. Every dollar you save doesn’t disappear and you will never see it again, it is a dollar (more with compound interest) you have to spend in the future!
You will read a lot of advice that says, buy 1 less latte a month and save it, that is $5 right there! And that is great advice, but it is just a start. Learn to either live below your means, or increase those means. If you want that coffee or martini or lobster dinner, make sure you can afford it within your budget, and if you want to be able to enjoy more of life’s pleasures, earn more money! Make yourself a more valuable commodity, become an expert in a field and charge for that expertise.
Two of the many reasons I started this blog was to force myself to market myself and become an expert on more aspects of finance. For every article or post I write, I spend hours reading/researching online. My hope is to make myself more marketable, to increase my value to current and future employers (and maybe one day be self employed).
Similarly, you can learn to turn a passion into a way to make money, because by increasing your means you increase your ability to live within those means.
Recap: Increase the amount of money you have in the bank by either saving and investing more, or earning more and living at the same level.
If every one of you were able to have $1,000,000 in the bank, I would be the happiest guy on the planet!