The Importance Of Saving Money: Conclusion
Hello dear,
We did it! Today marks the final letter in my “Save Money” series.
Don’t be sad! Next week, we’ll begin my “Invest Money” series (which means 14 new letters on investing!).
For now, let’s take a step back and look at everything we’ve learned thus far, and how it’s all connected.
You’ll notice this letter is shorter than previous ones, that’s on purpose.
I wanted to create something like an “index card” where you see everything related to saving money in one place.
This letter is that something.
Connecting The Dots — Why Save Money?
Someone recently asked me “Why focus on saving money? Shouldn’t people aim to make more to fit their lifestyle instead?”
In other words, “If I want to spend $100,000 a year, I have to find a way to make $101,000… Right?”
Wrong. We now know that way of thinking is outdated .
You can’t blame people for believing that though. A generation or two ago, they didn’t have all the resources we have today.
But, now we know better.
What do we know? Among other things, we know net worth matters more than income.
Your true goal is to know how much you spend every year, and multiply that number by 25. Whatever that amount is, once you have it, you’ll never have to work for money again.
There are two steps to reach that amount, making money and saving money. Here, we focus on both.
Of course, the more money you make, the faster you’ll reach that amount (and we’ll talk about making more money later this year).
However, not everyone can make more (well, not everyone wants to/ can put in the work to make more).
On the other hand, everyone (I repeat, EVERYONE) can save more. In fact, it’s the easiest way to become a millionaire.
How much you save will define how early you retire. If you save 5% of your income, you’ll retire in 66 years. If you save 75%, you’ll retire in 7 years.
How To Save More Money?
In several letters, I gave ways to save more money. Here’s a summary (almost in a step-by-step format):
- Kill your debt. You can only buy things you want when you’ve done this.
- Location is super important. You must live close to where you “live.”
- Ride a bike (or walk) everywhere. And if you must drive, drive a used car.
- Do not risk late payments. As soon as you get your paycheck, automatically:
- Pay your credit card(s).
- Pay your utility bills.
- Fund your 401(k) to the employer match, then fund your personal plan(s), then max out your 401(k).
- Put 20% aside. This way, you’re guaranteed to retire in (approximately) 37 years.
5. Save money at home (cut cable TV, don’t buy water, make your own coffee, cook your own food, etc… etc…).
6. Don’t overpay for insurance.
7. Don’t pay for a gym membership.
8. Try to avoid spending more than $50 per week in groceries.
9. Learn to minimize your taxes.
10. Don’t fall for marketing. Minimalism is the life-changing magic you need.
11. Your real goal is happiness, so be more positive! It will make you wealthier.
Remember, the goal is for you to save as much as you comfortably can every month (start with 20%, get as close to 50% as possible).
And that’s it for today!
“Hang on! What do you do with all the money you save?”
Don’t worry. Next week, we’ll start talking about that; the beauty of investing.
Thank you for reading my letters. I hope this was valuable to you.
See you next week (follow the series here to be notified).
Be well.
R
Thanks for reading! 😊If you enjoyed it, test how many times can you hit 👏 in 5 seconds. It’s great cardio for your fingers AND will help other people see the story.You can follow me on Twitter at @richardreeze to find out whenever others just like it come out.📚 Do you like books? If so you might enjoy my latest obsession:
Most Recommended Books.📚
Since I write about finance, legal jargon is obligatory (because the guys in suits made me). Before following any of my advice, read this disclaimer.
