Quick guide to save more money…

Saving money can be an incredible feat for many people. Our lives are full of enticing clothes, cool gadgets and fancy cars. Many will be eager to own them, giving them the gratification and social status. However, when looking at savings or cashflows, you will find many of them are in debt and no savings at all. Many of my friends are like that, they own cars, wear branded luxury clothes, own several designers bags and even multiple colors of similar bags! And they have told me that they have no extra money for their saving accounts. To start saving, you will need to develop habits that will help you reach your financial goals.

Savings are not for people who are poor and had a hard time earning money. Look at the tycoons around the world and you will see many of them are actually super savers. I had two friends who are pretty wealthy, but they had different spending habits. One managed to get a good sum of money and bought himself a $250,000 BMW Z4 Roadster, and I asked him why. “I like sports car and I got it since I can afford it”. Around the same time, the other friend of mine got the same amount of money, but instead of spending it immediately, he invested it in something else. After a few years, he is driving a Lamborghini! “I liked the BMW Z4, but if I can wait for a while and leverage my cash abit, I can actually own Lamborghini in a few years time.” The best thing is he can still easily afford another BMW Z4 if he wanted to!

See the difference? Being wealthy and rich is not about earning big bucks, it is the wisdom of using your money well. Saving money is one of the first few steps to financial wisdom. Here are some ways you can learn from the super savers:

Delayed Gratification.

Super savers do not believe in buying something when they decided to. Things that cost a huge sum of money need careful planning and many will save up so that they can pay upfront and avoid interest charges. Delaying your purchases also give you time to “cool down” and consider whether you really need item or not.

Cut your expenses.

Reduce your expenses equals saving more money. There are many ways to reduce your expenses. So take some time and sit down to review through your monthly expenses. Find things that are you don’t really “need” and stop any expenses on such things. Spend only on essentials and turn your expenses into fruitful investments.

Create budgets.

Super savers are really good at setting up budgets for themselves. Start planning your budget by tracking expenses and incomes in a month and categorize them into logical categories like groceries, entertainment etc. Know how much to assign to and spend within the limits. Excess cash should go to the saving accounts and not to other budgets. Again, budgets have to be in fine details, so that you get the most of out it.

Research your purchases.

Don’t buy on first sight when you have plans to buy something. Always do some research, by going to several shopping malls or online and compare prices. Consider the quality and price that will suit your needs and last you for a long period of time. Such great deals will help you to cut away some cash for savings.

Set financial goals.

 Goal setting is a MUST for any successful individuals. You will not achieve anything if you don’t have specific goals. Super savers sets very detailed goals and work hard to achieve them.Start by eliminating your debts, set firm deadlines and work towards them.

Respect your savings account.

Your saving account is not your cash cow!  Don’t let it be something that you can raid it or empty it for some unnecessary purchase. If you are saving up for a house, you should not be using the funds to buy  a new car! Dedicate your savings to a particular purpose and develop some discipline on how you use the money.

 

Related Resources:

• The Richest Man in Babylon: George S. Clason's Bestselling Guide to Financial Success: Saving Money and Putting it to Work for You
• Awaken the Giant Within : How to Take Immediate Control of Your Mental, Emotional, Physical and Financial Destiny!

 

    

First step to positive cashflow. Are you ready to change for the better?

If you clicked on the title and reading this right now, I know you are ready to make things right in your life! Congratulations for taking this important step. Before we can start thinking about brining in more money, we need to look at something else that is happening right now. Positive cashflow doesn’t mean how much you’ve got in your bank, but the inflow of your money, income, and also the outflow, your expenses. So increasing your inflow and reducing your outflow will result in positive cashflow, so let’s work on managing your expenses first.

Expenses can be classified into 3 categories:

1. Necessity. Necessity expenses are money spent on things you NEED. Food, Water, basic clothing and transport to work are examples. These are money spent to ensure that you cannot survive without it, very basic kind of things that will keep you going. Money spent here will never come back, so these outflows go directly to the drain.
2. Optional. Optional expenses are things that you spent on that you can live without it. Things that help you to enhance and improve your lifestyle, add comfort or gratification are all optional expenses. It is hard for some people to differentiate Necessity or Optional expenses. Well, most millionaires cut down a lot of their optional expenses because they can live slightly out of their comfort zone and able to wait out for better optional expenses. So expenses here are discretionary and it is the factor that determines how fast you can increase your cashflow. If you can settle for less, the earlier you will achieve higher positive cashflow and resulting better results. For me, I do set aside a fixed monthly amount for optional expenses and it is working well for me. I agree that we need to spend something that make ourselves happier and motivated al the time. :)
3. Investment. Investment are money you spent which you expect yielding more returns in the future. It may not be in monetary form, it might be in other forms like health or skills. You can invest in a pair of sports equipment so that you can go jogging everyday and keep yourself fit. Or you spend money to attend a financial management course that will help you to understand managing your funds. Many people use investments as excuses to spend on optional things, like I need a faster and more powerful computer so that I can perform better. True it helps, but can you do without it? Is it worth the money you “invested” in? The return of investment is something to consider in this case. And of course monetary investments in buying financial products like mutual funds, stocks, investment packages will increase your return.

If you can effectively manage how you use your money, you can control your expenses well and gradually increasing your positive cashflow. How often do you do financial management? Millionaires do it everyday! They spend an hour or so, assessing their expenses and reviewing their funds on their desks or spreadsheets in their computers. It’s a habit that we should adopt too, by looking through what you spent everyday is an easier way to see how much you spent on necessities or optionals and even investments. A general guide is necessities should be roughly the same amount every period and  spend less in optionals and spend most of it in investments. Let most of your money work for you and not working for money!

So the first thing is to invest in your ability to reduce your expenses. Do spend some time researching on how you can cut down your expenses, look through your daily expenses and determine what are optionals / necessities and how you can use your money for investments. Here are some really great books that I recommend, Wink and Grow Rich (Wealth Dynamics), which helps you to understand the concepts behind handling cashflows and different ways to leverage flows for better results and also the popular book, Rich Dad's CASHFLOW Quadrant: Rich Dad's Guide to Financial Freedom, that shows you the tools and methodologies used by successful millionaires to create and increase their cashflows. So start looking at your expenses today!

                       

Get out of the rat race! Stop trading time for money

Everyone trades time for money. Every working day you will wake up and go to work for the entire day and earning a sum of money for the hours spent at work. And you do this for the next 30 years of your life! It is an one to one exchange, when you stop giving time, you won’t be getting any money. Everyone has the same number of hours everyday, 24 hours, but why some people can earn more every day? Yes the higher paid workers are doing more value work, but was paid below the value they have contributed to the company.

Most corporate employees are paid fairly low, do a quick calculation: Monthly Salary / (9 working hours * 20 working days).

So if you are earning $2,400 a month, you are paid $13 per hr (~$30,000 annually)

If you earn $4,000 a month, then you are paid $22 per hr (~$50,0000 annually)

If you earn $8,000 a month, you are paid $44 per hr (~$100,000 annually)

Compare if others that have successfully got out of the rat race and not trading time for money. One had created a stream of income by writing a book and earning royalties, annually he is earning $50,000 on the first year, which he had invested 100 days writing it. So that translates easily to $55 per hr. And did you realize he only need to work 100 days rather than the usual 200+ working days? This does not stop here, the following year his book gain popularity and royalties rose to $80,000 and he had not spent anytime on it, the average hourly rate rose to a whopping $144 per hr for that 100 days he spent in the first year! If he keep up the momentum and write more books, the return is exponential!

Can you see the difference now? It is about investing time in the right thing that will bring you exponential return. Passive incomes are incomes that keep coming in without you having to trade with time. So if you are able to create more passive income, you will only need to spend less time for money. And if you reach a stage that money flow in more than what you trade time for money, you don’t have to work anymore! That is financial freedom, the passive incomes you created started to bear fruits that you no longer have to worry about it any more.

Although you might have tried and passive incomes may not come as much yet, say $1000 a month, isn’t that better than trading time for money? You have at least additional income to now, and passive incomes grow on their own, and you can expect more to come gradually. So don’t get discouraged when it doesn’t work to your expectation. Hang on and you will be there soon enough!

 

                

You can gain more tips and guides from many sources about creating passive income. I recommend you to find out more and read a couple of books that will accelerate you to creating your first passive income. Personally I enjoy reading  Secrets To Creating Passive Income and becoming financially free - even in a slow economy, its inspirational as the book guides you through various methodologies and concept of creating passive income and how to stay immune to other factors that might affect you one way or the other. Another very popular book, The Millionaire Fastlane: Crack the Code to Wealth and Live Rich for a Lifetime. sets your mind in the right direction and get out the rat race, through creating passive incomes and spotting opportunities!