February 26, 2013
By Benjamin Feldman, Ready For Zero
Join, America Saves, Military Saves, Jeff Rose of Good Financial Cents, and Ready for Zero for a Tweetchat full of tips for paying down debt in honor of Military Saves Week 2013. Prizes will be given out including a $100 gift card. Today at 3pm EST- follow #MilitarySaves
A lot of us are trying to reach that day when we finally feel financially prosperous. We work hard and do our best to make good decisions, but that prosperity still feels far away, almost as though it will always be just out of reach. Believe it or not, if you feel this way you are not alone - not by a long shot!
Fortunately, there is definitely hope because you can educate yourself on some straightforward techniques that can help to ensure you do reach that future you want. Use the three powerful principles below to become financially prosperous:
1. Be the boss of your spending
For most of us, we’re never really taught how to manage our spending. And what sometimes ends up happening is that we buy whatever we seem to need while trying to still be frugal and pay our bills each month. This is not a terrible approach, but it has one major problem: it often gets poor results because it is not based on a vision or a plan.
In other words, what you need instead is a proactive plan for how you will spend your money each month. To accomplish this, you need to write down how much you are going to spend on each category (groceries, clothes, entertainment, housing expenses) in the coming month. Then track your spending as you go through the month and try to stick to your plan. Use these tips on reducing your spending in each category. It’s crucial that you not spend more than you earn. But beyond that, you should also aim to have enough of a cushion in your budget to allow you to save!
It’s okay if you don’t hit your plan exactly in the first month, but the key is to continue planning and tracking your spending every month from now on. Soon, you’ll be in complete control of how your money is spent... and that will put your big goals within reach.
2. Save for the future
Once you are in charge of your spending, the next big principle you need to take to heart is the power of saving (starting today!). Because of the way interest works, money you save today is more valuable to your future self than money you’ll earn later on. When you save money today, it will begin earning interest and that interest, while small at first, will eventually grow to be quite significant. Thanks to compound interest, your dollars saved today will be many dollars for you to rely on later on.
So how to save money? If you’re following your spending plan, then you’ll be 90% of the way there. In addition, make sure you pay off any debt as quickly as you can, and try to increase your income if you can. Most importantly, automate your savings contribution so that you are guaranteed to save every month. That way, you won’t allow yourself to get to the end of the month and have no money left over for savings.
3. Make decisions based on your long-term goals
Finally, once you’re controlling your spending and automatically contributing to your savings each month, then you must think about your long-term goals. This is the part where each person’s strategy may be different. For example, if you hope to start your own business one day then it might make sense to be extra frugal so that you can build up a healthy savings to give you the flexibility to weather the early stages of a new business venture when income may be unreliable.
Or on the other hand, let’s say you have a job that you plan to stay at for a long time, but you’re worried about whether you’ll have enough for retirement. In that case, you should focus your financial strategy on boosting your retirement savings.
Regardless of what your goals are, it makes sense to plan specifically for them. That way you’ll be much more likely to get the results you want while maintaining the level of financial security and flexibility that you need. And don’t forget to take the Military Saves Pledge. If you follow the 3 main principles listed above, you will be on your way to ensuring a future of financial prosperity. You can do it!