Thursday, 28 November 2019

6 Places Your Money Needs To Go | Money Saving Tips

Money Saving Tips

This is going to be an all-inclusive article showing you the 6 places that you may want to consider putting your money after you get paid. Most people can't get past step number 2 but if you follow along and implement all 6 of these different steps then you could find yourself in a much better financial position than you were previously. 


Let's Get Started

It's very important to understand why is it that so many people who are making $50,.000 to $70,000 per year or more, why is it that they're still struggling financially, why is it that they're in large amounts of debt. Is it the economy pitted against them? Is there a massive wealth gap, are we being taxed too much, what's the problem here? It comes down to the number one factor is that most people don't understand how to manage their money. it's not taught in our schools, it's not taught by our parents in most cases because some of our parents are in the same financial pit that other people may end up in. And their kid may end up in it. And hopefully, we can find some value right now in this article.


  • It turns out that about 40% of Americans can't afford to pay a $400 emergency fund expense. Because they're in such a financial hole at the moment in most of their life that they were never able to dig out of that financial hole that they may be in.

Let's talk about the first place where you want to consider putting your money once you get paid.


1. Retirement  Fund

If you're in America, about 70% of visitors on this site live in the United States, you could take advantage of something like a 401k plan that may be offered through your employer. If you don't have 401k plans there are other options as well. But taking money out before you even see your paycheck through something like a 401k could certainly help you build that future that you may be looking for. Because one of the worst things in the world this has been quoted by many people I'm not sure how entirely true it is, but it definitely holds to some truth and that is that the only thing worse than dying is running out of money before you die. 

Like I said, I would much rather be alive than dead, but still, at that, you want to think about the idea of running out of money before you die. It's certainly a depressing idea, it happens to people it's really sad to see and you don't want that to happen to you. Even if you're in your 20s right now and you think well, I'm not going to retire for another 40 years what's the point in saving for retirement, this is the perfect time to do that.

Just putting away 5% to 15% of your money before you even see your paycheck into something like a 401k especially if your employer is offering to match that opportunity then that's something that you may want to consider. Just keep in mind that I'm not a financial advisor and you need to understands that there are risks involved with any financial decision that you make, so any investment that you're going to make there are going to be risks involved and you need to make your own financial decisions as to what you're going to do with this, but this is an idea that a lot of people do take advantage of, but sadly some younger people especially when they first started their jobs they opt out of the 401k, they opt out of some of this pre-tax retirement that they can invest into and they and up really hurting themselves over the long run.

Retirement fund is the first thing you want to consider doing before you even get your paycheck, set it up with your employer, if they don't offer that there are other opportunities especially if you live outside of the United States, your government may have something similar to a 401k plan or investment fund that you can get into.


2. Necessities

When I say necessities we're talking about the bare'bones necessities to keep you off the streets and to keep you alive. We're not talking about a TV, buying Xbox for your nephew for Christmas, we're talking about the basic needs of people.


  • Food
  • Shelter
  • Transportation
  • Healthcare
  • Utilities
  • Electricity
  • Not getting your water shut-off
  • Not getting evicted from your apartment

Depending on where you live, depending on how many kids you have, depending on your current situation, this shouldn't be an excessive amount of money we're talking about the basics here, so paying those is very important to keep yourself alive.


Needs Vs Want

You need to understand your difference between needs and wants. A lot of people can't decide on the difference between those two so you want to consider what you do you need to stay alive and what you do want. Do you need to get McDonald's or could you find a way to lower those expenses for food? 

Healthcare is very important never skimp on health care that's something that I think is something that people will skimp on, they'll skip health insurance, they'll skip going to the doctor's because they want to save some money but that could end up hurting you in the long run.


3. Emergency Fund

  • $2,500
  • Liquid
  • Easily Accessible

Everybody should have an emergency fund regardless of whether you have a million dollars in your bank account or a negative $100,000 to your name. Having an emergency fund is going to be one of the first steps to alleviating some of the financial stress that you may have at the moment. This is going to be a crucial step.

I just put $2,500, this could be $500, $1,000, $10,000, over time it's nice to build this up, a great strategy for doing this is to just start by taking $10 to $40 out of every paycheck and putting it into a separate emergency fund that is very easily accessible. You want to be accessible because this is for situations where it's a true emergency, maybe you don't have any cash on you but you need to get a tooth removed because you're in a lot of pain and you can't focus on anything else because you're in so much pain, that would be an emergency.

Another emergency would be if your car breaks down and you have to use that car to get to work that's an emergency, but nothing else we're not talking about if you have to buy somebody a Christmas gift, we're not talking about if you just feel like going out to eat somewhere or vacations, this is strictly for emergencies and emergencies only.


Liquid And Easily Accessible

You want this to be liquid and easily accessible. Maybe separate savings account or checking account would probably be the best option so you can easily access it very quickly. You can also consider doing it in cash but I wouldn't consider having $2,500 cash laying around, but like I said, you start with a smaller amount of money, start with $500, $1,000 and then build it up over time. Especially if you have a family maybe you want to consider getting this a little bit higher may be closer to $5,000 in case something happens, maybe you have to pay some medical expenses and you have that money on hand. 

Like i said even if you're in debt this is important to have because if you are at the zero dollar mark and you don't have an emergency fund, every time there are a little expenses you have to start digging into more debt to pay off that expenses so just having this is going to be a big help.


4. Paying Off Your Debt

  • Snowball Method
  • Avalanche Method

Once you build that emergency fund, once you start to get a little bit in your feet, here you want to consider how you're going to pay off your debt. There are multiple ways to do this and depending on what type of person you are and depending on how much debt you have there are two different strategies for paying off your debt.

Read: How To Get Out Of Debt Fast - Debt Snowball vs Debt Avalanche

One of them is called the debt snowball method and the other one is the debt avalanche method. 


Snowball Method

For a lot of people who are really struggling financially, they have large amounts of debt and they're struggling to actually stay motivated to pay off this debt then you may want to consider using the debt snowball method. Essentially what this is going to be let's say that you have 5 different types of debt, home mortgage, student loans, personal loans, credit cards, and a car loan. 

What you do with the debt snowball method is you're going to tackle the one that has the lowest balance. Again read this article below

Read: How To Get Out Of Debt Fast - Debt Snowball vs Debt Avalanche


5. 4-8 Months Payroll

  • Online Saving
  • Money Market

I would say probably the most enjoyable step of the entire process and that is by saving up at least 4 to 8 months of payroll. Let me give you an example. 

I try to keep this closer to almost a year full of payroll, but let me give you a story here. 


  • Bill Gates when he started Microsoft he found that he was struggling to please investors, he found that in some cases investors would be putting a lot of pressure on him so what he did is he saved up enough cash, he wanted enough cash in Microsoft. So that he could pay all of his employees for an entire year. He had a year's payroll on hand in cash that he's able to pay all of his employees if the company wasn't making any money.

The reason for this is because he realized that there's going to be times where maybe they put out a product that is not as great as what they thought it would be and maybe they're not pulling in as much money as they thought they would be and they would still be able to pay their employees while doing this. This is something that I learn about and I realized that if you have a job and you're taking that for granted right now because we have a really good economy at the moment, things can go south. Think about the recession that we had about 10 years ago and how many people were losing their jobs unemployment rate almost 10%

Especially if you're an entrepreneur, if you're self-employed then you'll have to understand that there might be times where things go south where maybe your income drops significantly, so having some money in your bank account and not just a regular bank account where you're losing money by putting in a regular bank, we're talking about something that's going to keep up with inflations.


Online Saving

I like to go with something like an online savings account, you can get them for over 2% interest on those and that should essentially keep up with inflation, it's something that is very steady. You don't want to put too much money into this in a lot of cases and once again, you make your own financial decision, you can choose to do this and do not do this. But there is a time where people lose their jobs, there are times where people fall on a hard time and having this is going to give you such peace of mind knowing that if you lose your job today you can live off this money for a year before you even get a new job.


Money Market

You can also consider putting money into a money market account or possible CDs. I'm not a big fan of CDs because they lock your money in there for a certain length of time, you also consider putting this into investments and maybe the stock market, bonds, but this is more stead and it's more predictable.


6. Investing

  • Real Estate
  • Stock Market
  • Bonds
  • Etc

This is how you can truly get your money to work for you, for number 5 talking about money in that bank account that's netting you 2.5% interest that's probably not going to make you rich, it's going to be a nice thing to hold on. But investing is going to potentially make rich as listed above.



Conclusion

After these 6 steps. That is when you can take the money that you have leftover and then spend it on travel, vacations, TVs and different type of entertainment. But only after all 6 of those steps you have to pay yourself first before you can start doing all these other things that you may want to do and this is a problem that I think some people run into with money management.

This is why people who are making $80,000 per year are poor. Because they're not taking these 6 steps but instead all of their money comes into their checking account, they're not tracking it, they're not running a budget, they're not running themselves like a business and they just spend most of it on entertainment, leisure, travel and all kinds of different things that are not necessities and they end up really hurting themselves. 

Pay yourself first, invest money and you might find yourself in a much better financial position for the rest of your life. 

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