Okay, it is actually 40 or even 50. But that is putting the cart before the horse.
I was not big on savings. As a matter of fact, that was the last thing I would do, literally. I would pay the bills, of course, and then have a good time (of course) and then, if there is money left, the money goes to the bank. This happens maybe, oh, twice a year. It does not help that D and I share the same interest (or obsession) – and those are eating in nice restaurants and watching movies (and going to spas, and buying Nike Shoes, and Zara dresses, and bags, uhm).
In one finance seminar I went to, I was introduced to a new money philosophy – pay myself first. I did not understand.
The speaker explained (thankfully) that if we continue to do what we are doing – putting just the “left-overs” in the bank (how did he know?) – we will not save ourselves.
I wanted to save myself so I practiced what I learned. Immediately.
Upon receipt of our salaries (or business income), I carve out at least ten percent for savings before I do anything with the money. This ten percent I put out of reach – in a savings or a time deposit account (no ATMs) or in mutual funds or any interest-bearing account – to be forgotten and never to be seen again until compounded interest has done its magic.
I will explain compounded interest in another post but suffice it to say that Einsten lauds it as the single most powerful force in the universe.
Other wealth attraction authors suggest more complicated (but interesting) savings schemes. Take out:
- 10% for Investments
This is to be used for playing in the stock market, investment in business, partnerships, opportunities. Liquidity is necessary to take full advantage of opportunities.
- 10% for Tithing
I was surprised that even non-religious authors entreat people to be generous (give to charity, or just give for the pleasure of giving) because they believe that the universe gives back much, much more than what you have given away.
- 10% Emergency Fund
The recommended amount is at least six (6) months of the household expenses. This is for the unexpected: disability, sickness, death, job losses.
- 10% Fund for Education
This is not for the educational expenses of your sons or daughters. This is for YOU – for your self-improvement . You can learn a new language or a new skill. And yes, you can buy books (books!).
But the best fund idea which I implemented right away, and this one I got through my financial planner (who did not want me to be a miser, yay!), is the creation of a FUN account (also 10%) that can be spent guilt-free on a-n-y-t-h-i-n-g. Whoever originally thought of this knows and understands human nature. This fund will placate the “hunger” that gnaws on man ever so often, mostly when he is at his weakest (sure works for me!). This is to be spent monthly, although our financial planner, whose EQ is much higher than ours, advocates 1 year.
You can try with just putting away 1% or 5% and setting up only 1 or 2 of the funds. Just set up the accounts. You will be surprised that you CAN survive with what is left.
Article by Issa. Art by D. Copyright 2009.
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