Friendly Disclaimer: This is not meant to serve as a financial plan, nor am I a certified financial planner. What follows are some tips and tricks I've picked up throughout the years from folks much wiser than myself.
Saving money while seeing the world might not be as difficult as you'd imagine 🌎
Even if you have student loans, a car payment, rent, cell phone, and other bills (like I do), there are steps you can take starting today that will make a huge difference for you financially in the long run.
Oh, and you don't have to travel with all of the extra money. You can buy yourself something special, or dare I say, put it in savings!
Let's say you make $50K (USD) per year, ~$35K after taxes. You also have these expenses each month:
That leaves you with ~$1,200 per month in "fun monies." Here are 3 steps to making the most of that money:
- $600 rent
- $300 student loans
- $300 car payment and gas
- $75 utilities
- $75 cell phone
- $300 groceries and other sundries
1. Save first and get uncomfortable
The biggest mistake I see people make is waiting until the end of their paycheck cycle to save.
We all like to think that we'll save money at the end of the pay cycle, but life gets in the way. Plus, it's always harder to spend money you don't have.
Put away the maximum amount of money possible the moment you get your paycheck. A good rule of thumb is to save roughly 15-20% of your income each month. So in the example above, let's put away $600 ($300 per paycheck).
Investing is one of the single most important factors in building long-term wealth and affording yourself the freedom to live financially independent.
Even if your company doesn't provide a 401K plan, it's still important to start your own investment account. A traditional 401K or Roth IRA will do just fine. As the chart shows above, investing allows you to unlock the power of compound interest.
A good rule of thumb is to invest 8-10% (or more) of your income. So let's put away an additional $300 into our Roth IRA.
Look at that, we've already save $950 and we still have $300 left over!
3. Track everything and prioritize
A recent study found that 49% of all Americans are living paycheck-to-paycheck.
If you want to travel the world, but you find that you have nothing left to save or put towards debt at the end of the month, you’re living a lifestyle you can’t afford. Now I'm not hear to criticize your lifestyle. Lord knows that I love a weekend out and an almond milk cappuccino for $6.50. But traveling is a priority for me and my wife and so we often forego the unimportant stuff.
Many of us would be surprised to see all of the small things we spend money on each month that add up to a solid chunk of change. That's why it's important to track everything.
You can do that manually with a homemade spreadsheet, or use an app like Mint to track your expenses. Either way, track everything, cut what you don't need each month, and prioritize your real goals.
Until next Friday, Thinkers.
P.S. I put together my first IGTV video. Check it out - you can get to know me a bit better and see how I train for the 13-mile Spartan Race each year in Breckenridge, CO.
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