- Do an honest audit of:
- How much you currently have
- How much you currently earn
- How many do you currently spend
- 5 Expense types:
- Variable expenses
- Regular expenses that are somewhat fluctuating, and do not have to pay on a fixed timeline
- E.G: gas, groceries, and entertainment
- Fixed expenses
- Do you have to be paid on a regular time-line, like every month
- E.G: rent, cell phone bill, car loan
- Studies show that generosity actually leads to an increase in income
- Paying yourself
- You can automate this by simply opening up a savings account having an automatic transfer
- Fun money
- Money to enjoy life on, because what’s the point of having financial goals and money if you can’t enjoy it?
Which of these is taking up your priority is what will determine your finances.
The key is to prioritize savings before anything else, including your fixed and variable expenses.
It’s up to you how aggressively you want to save. 10% is a very solid amount and can work to build up to a substantial amount of wealth over time. Or you can do 25%. Any more than 25% may be cutting into territory where you have no fun money, which might not be what you want.
Understand the psychological phenomenon that no matter how much income you have, there is a tendency to spend as much as you earn.
- By automating your savings, you will likely not even notice where the money went, just like before, except this time it is being saved and getting stored for future passive wealth creation vehicles
- You can literally take action RIGHT NOW and go to your bank to have 25% of your income transferred directly to a savings account
Focus on the big wins first when looking to cut your expenses
- Rather than trying to go completely monk mode and cutting out all alcohol when you’re in…