Everyone dreams of financial success: of being able to afford a house, live comfortably, not worry about money, and look forward to an enjoyable retirement. However, some think that they have to earn a lot of money, win the lottery, or inherit a windfall to make this dream come true.
Not necessarily. The answer to true financial prosperity is to build your wealth slowly over a number of years, by building up savings. Although this is not as exciting as becoming a millionaire overnight, it is much more realistic. You would be amazed at how much money you can save up by setting aside a small percentage of your earnings over a number of years.
Pay Yourself First
So how can you manage to save part of your earnings, when all of your incoming cash seems to disappear on bills, payments, and living expenses? Rather than paying all of your bills first and then spending what is left over, you should pay yourself first.
Whenever your paycheck comes in, set up an automatic transfer which will take 10% of your pay and place it directly into a savings account. If this money is “out of sight, out of mind” you will be less likely to be tempted to spend it. If the transfer happens automatically, you will not have to think about it and will never forget to save your money each month. It doesn’t require any willpower or planning, just one simple transfer that will automatically save you a little bit each month.
Live Within Your Means
We often get comfortable earning a certain amount, and spend the maximum amount of money that we can afford according to our earnings. When our wage increases, our lifestyle expenses increase because with a raise we treat ourselves to a new car or a few more meals in a restaurant each month. However, if you live only just in your means, you will never be able to save for large purchases such as a house, set aside money or retirement, or travel. You will also not have any emergency fund, and your high expenses will soon cripple you financially if you suddenly lose your job.
If you can automatically put 10% of your income into savings, the drop in spending money might seem like a shock at first but you will soon get used to it. You will find ways to still do the things that you love for cheaper, and stop spending money on things that you don’t need. You will live a life that is very enjoyable, and yet you are also growing a fund for your future all the time.
Pay yourself first, and you will be on the road to financial prosperity throughout your lifetime!
This article is written by Elena Price, a freelance writer who currently contributes to a number of finance websites and blogs including Fiscal Muses.