Over the years of teaching and educating people on how to live an extraordinary life I have had many ask me about how I structure my money or if I have learned anything from studying under, with and also from, coaching some very high achieving clients. When I teach people one of the most important keys I have found to creating abundance, I am usually met with resistance, excuses and stories as to why they can’t do it. One of the most important and key things I teach, which I have learned from almost all wealthy people I have studied, learned from as well as those I coach and associate with, is to SAVE YOUR MONEY before you pay your bills.
I know this seems almost impossible for most to do at first but let me explain.
One thing I have learned about money is that most people will spend as much as they earn.
Therefore, most will never save money and the amount they do save will eventually be spent. This is not the purpose of saving money.
The purpose of saving money is not what most think
The purpose of saving money is to create a safety net so that your brain doesn’t have to worry about money. This means that eventually you will not make financial decisions based on fear and greed. It also means that you can feel safe if the economy changes, markets become erratic or if anything misfortunate happens. It creates peace of mind.
I normally suggest to start with a goal of saving 3 months’ worth of your expenses. Once you create a habit of saving, I usually suggest to save at least 12 months’ worth of living expenses at your current lifestyle. That way if you were to lose your job, the market crashed or anything happened, you can survive for a minimum of a year.
After you have this safety net most wealthy people suggest that only then should you think about investing money.
The reason why saving is important before investing is because almost all, if not all financial markets move based on fear and greed. When things are going well most people get greedy and want to make money. Over time bubbles are created as more and more financially uneducated, excited individuals enter the market. Eventually the bubble will burst causing markets to plunge into chaos. This is where fear drives the markets as most try to get their money out of a rapidly falling market. As the market begins to bottom, financially educated investors who are emotionally stable begin to enter the market due to cheap prices. Over time more and more people begin to see the market prices increase again as more educated investors enter the market and greed sets in again.
If you are one of the individuals who fear losing money yet get excited when things look good then you too could potentially learn the lesson of being emotionally unstable and playing with the emotionally balanced who see the markets for what they really are at any given time.
The saving account offers a safety buffer that creates mental and emotional stability around money.
That way you can make emotionless investment decisions that over time will lead to great financial abundance.
TIPS FOR SAVINGS
- Putting the money in a high interest account leads to greater gains over time
- Every 6 months, go back and assess your current living expenses. If they have increased, top up your savings account as needed
- Start by creating a habit of saving. Small amounts today, lead to big results in the future.
- Habits create results. Short term thinking leads to short term pleasure and ease, but long term pain. The habit of saving is more important than how much you save.
- If you need to at first, look over your current expenses and cut as much spending as you can down to save before you spend. That way you will begin to get ahead faster.
- The act of saving first means you can only spend what is left, not save what is left (which is usually nothing or not much).