I talked with my sister today. The conversation underscores the idea that no matter where you live or what your circumstances, saving and investing money is difficult. We both talked about how so many personal finance experts talk about paying yourself first and how much of your income should be going to savings. However, she pointed out that being practical is different than having money.
It’s true. If you have more money, saving and investing could be easier. At the same time, you must work hard to put a strategy in place to drive money regularly and automatically into savings if you don’t have a lot of money. That is why we talk often in terms of percentages – not amounts of money.
No matter what you make and no matter what you save, it’s the little money that matters – not the big money. Big money always takes care of itself. If you focus on the smaller amounts, you will help yourself build wealth faster than you think.
THE 1% SAVINGS PLAN
I talked with my sister about “The 1% Plan For Saving.” This is where you take your very next paycheck and multiply it by .01 to get 1% of your after-tax income. That is an amount that almost everyone can “push off” to savings if they really want to try to have a savings option. Then, each month after that, you would increase the amount of your savings “off the top” of your after tax income (paycheck) by another .01 (so, the second month would be .02, the third would be .03 and so on).
The basic idea is to move over time to increase your savings “off the top” so that you don’t create a shock to your budget and you launch and increase savings over time until you reach .20. At that point you will be saving 20% of your after-tax income.
YOU’VE HEARD “PAY YOURSELF FIRST”
It is critical that you pay this “bill” to yourself first each month. The goal will be to eventually build an emergency savings fund with 15 to 18 months of expenses in savings (a money market savings account and certificates of deposit).
Keep in mind that time will always pass. Building your emergency savings fund will just develop quicker than you think.
COUPONS, COUPON CODES & WHAT TO DO WITH ALL THAT “SAVINGS”
My sister and I talked about saving money with the use of the internet, coupon codes and coupons in general. We talked about our rules:
1. If you use coupons to get anything but something you ordinarily purchase, you are not saving. You are participating in marketing.
2. If you don’t take the amount you saved on each coupon or thru negotiation and put it in actual savings, you have not saved. You have participated in marketing.
3. Always compare units of things included in packages. Just because you are using a coupon, that does not mean you are saving money. Use coupons when they are in your favor and always do the math to know if it really is a “deal” compared to other packages of the same product.
It is critical that you spend some of your personal time seeking out coupon codes and coupons to print on the internet and other ways to save money. We recommend that you plan for one hour every other weekday or something similar that fits your schedule. The main importance is that you focus on developing a specific schedule of regular opportunities to find savings.
SAVE YOUR KIDS
A lot of people have asked for additional ways to participate with this blog. We have several ways you can engage us and share with others. We don’t do a good job sharing with our children how to manage money, saving money and invest money regularly. Let’s call it “personal financial education.” This has to change.
That’s why we have launched http://www.middleclassmoney.com and this blog along with our other blogs and groups.
The only thing we sell associated with any of our blogs or groups is “How To Survive Any Financial Crisis” at http://www.middleclassmoney.com. The entire project is 35+ pages and about 20,000 words focused on how the financial crisis happened to most people, how financial crisis matters less when you have a working plan in your personal financial life and how you can grow wealth over time. It includes a specific chapter called “The Brass Tacks” that most people call the action chapter. The e-book is priced at $4.95.
If you want to participate for FREE, you can do that. All you have to do is go on Facebook.com and search for our free group called “Live The Lifestyle Your Family Deserves.” Just click on “become a fan.” You will gain immediate free access to our free financial blogs and more.
You can sign up on this blog to get our free monthly e-saver. Just look to the right for the e-mail sign up window when you are on http://www.stickyasset.com/blog and enter to become a member. It’s also free to you.
Rich parents share with their children the secrets to saving and investing. We have decided that the middle class needs a voice to help them share again and again and get ahead.
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It’s time to build your own plan for financial security one step at a time.
You can do it!