Have you ever asked yourself this question. “I’ve been working hard all my life but I wasn’t able to save or invest in anything. Where did my money go?” If you have, maybe it’s time you look into the formula you use in saving so you can invest and don’t miss out on opportunities to increase your financial worth.
Here’s the formula for saving the wrong way:
INCOME – EXPENSES = SAVINGS
As Warren Buffet, one of the wealthiest men in the world, says, “Don’t save what is left after spending; spend what is left after saving.” This simply means that you should pay yourself first. Following this, the correct formula for saving is:
INCOME – SAVINGS = EXPENSES
As you can see, the formula says that you need to save first before you spend your money. However, there’s an even better formula that goes like this:
INCOME – TITHES – SAVINGS = EXPENSES
Tithe is the money you give to the church or an organization that nurtures your spiritual growth. And as a guide, this tithe should be no less than 10% of your income. However, you may adjust and increase this percentage according to your preference or capacity.
The savings that you should set aside as payment for yourself if possible should be 20% or more. You may treat it like a bill that you must pay first. It only makes sense to pay yourself first before you pay other people’s bills, right? You and your family’s well-being are more important than your other bills you have to pay.
Both spending and saving are habits we have developed over the years. Imagine if you could make small changes in these habits. Say, spending P20.00 less on cellphone load so you could save P20.00 more in a day. Now, that’s P600.00 in a month. This P600.00 savings a month can turn into P894,214.00 in 30 years at 8% interest annually. As you can see, a little sacrifice can reap great rewards and benefits in the future. So, it’s not really how much you earn that counts but how much you keep.
As you may have noticed, time is money. The sooner you save, the better for your future. So it is really best and to your advantage when you do not procrastinate because the cost of waiting is very high. Unfortunately, when people are young, they tend to delay saving thinking they still have a lot of time.
The truth is, you do have two options:
- Save now and enjoy later.
- Spend now and suffer later.
Indeed, building a solid financial foundation takes time. Get rich quick schemes, hot stocks and rising real estate markets can sound appealing but one wrong pick can set you back big time from your financial goals.
In order to build your wealth, you will want to invest your money in vehicles that have the potential to earn strong rates of return. Now, investing is not gambling. Of course, you have the potential to lose your money in investments, but if you invest wisely, the potential to gain money is higher than if you never invest. You do have to understand how money works, have a plan, and stay disciplined with your action plan until you reach your goal.
Here are just a few reasons why you should save and invest your money:
- To keep up with inflation. If you do nothing with your money, your purchasing power will diminish. So investing your money allows you to keep pace with inflation.
- To earn higher returns. In order to grow your money, you need to place it where it can earn a higher rate of return. And investment vehicles tend to offer the opportunity to earn higher rates of return than savings accounts.
- To grow your money. When you invest your money in stocks, mutual funds, uitf, certificates of deposit, bonds, treasury bills and etc., you get much higher returns that allow your money to grow, thereby, creating wealth overtime.
- To save for retirement. As you are working, you should be saving money already for your retirement and put this into a portfolio of investments such as stocks, bonds, mutual funds, real estate, businesses and etc. Then, at retirement age, you can live off funds earned from these investments. While still young, you may want to invest that involves greater risk as this increases your chances of earning greater wealth. As you get older, it may be wiser to invest more in conservative ones since you are nearing retirement age already.
Indeed, saving is not enough. You have to save the right way and invest it to grow your wealth and make a difference in your life, in the lives of your family members and in the lives of the people around you.
If you’re ready to learn how you can manage your money in a reasonable way and be empowered to build a solid financial foundation for you and your family, I highly encourage you to join me and my team at International Marketing Group or IMG and be with a community of like-minded people who invest in their financial education. Just click the link below to start your journey to becoming a Millionaire: