We’re living in an era where information is abundant but pretty much no one knows how to plan saving money, it’s a topic of heavy importance but not discussed enough.
Everyone pictures themselves living in a rich context at some point in life, but not everyone is willing to learn and apply the steps to enjoy such status of greatness, in fact, more than 90% of the world’s population will never have enough financial strength during their lifespan to buy a house without recurring to a loan, can it get even worse? Yes.
According to GobankingRates, 69% of Americans have less than $1000 in savings and another shocking 49% said they have $0 allocated to the purpose, yet everyone has dreams of being worth several million dollars or more.
By picturing being rich, luxury or a collection of anything money can buy immediately pops to mind, what we fail to process right away is that luxury is precisely the opposite of stable wealth.
Coming as no surprise, fortune costing assets will kill your liquidity and won’t shake off the shallowness in your life.
Impulsive buying, loyalty to big brands, over-priced clothing, gambling, jewelry, cars and parties, these are low to middle-class over-practiced spending habits directly tied to poor managing skills and personality disorders.
Consumerism is not a joke, big names in the industry have dedicated workers searching for ways to relieve you of your money as fast as possible and they become more efficient at it every day that passes by.
People who earn less are the ones who spend more, in the middle of this, society has probably taught you that the rich achieve their status by being overpaid or from stealing the low-income classes, in the big picture these examples are nothing but dust.
Blaming someone else for your own mistakes is easy but it won’t change your financial position a tiny bit, the core reason behind the poor getting poorer and the rich even richer comes down to financial managing habits and current personal sacrifices for future stability, rich people and lower classes act on these subjects in a drastically different way, therefore, if you’re not rich yet, you’re the only reason behind it.
Low-income classes are psychologically triggered to spend every single earned penny and they’re automatically destined for financial failure from the moment they’re born, the roots of this living model are actively but unconsciously passed from parents to children for generations until someone breaks the cycle, either by pure luck or by being different from the crowd, it’s not uncommon to find a rich person that has felt out of place somewhere in the past.
What if the tables suddenly turned, the rich became poor and the poor rich?
Everything would fall back to the starting point with the right amount of time if you ask me.
Turns out that being rich is not as simple as just having money, it’s in your personality, managing money the right way is just as important as having a massive income, if you never change your consumerist ways, you’ll end up in the pit no matter how much money you have at any given moment.
Suffering from financial problems? I’ve gathered a list of financial steps that will hopefully guide you in the direction of a better future:
1- Get a hold of your Income vs. Expenses
Track everything you purchase during the minimum period of a month to start painting a financial map, keep going after this period as monthly expenses can differ from one month to another and it’s always a good idea to know where your money is being channeled.
There are budgeting software and apps at your disposal anywhere but if you’re afraid of third-parties collecting your information or prefer doing it the old-fashioned way, we’ve got you covered.
Download our budgeting spreadsheet for free here (excel file, sample image below).
It works by subtracting all your expenses from your income and automatically calculates both expenses and budgeted percentage as you fill them, feel free to do whatever you want with it.
I have protected some cells so you don’t mess up the calculations by mistake, but you can still edit the file, the password to unlock it is inside.
By using a budget tracking solution, you’ll be able to pinpoint exactly where the majority of your after-tax income is spent and trim unnecessary purchases in order to start saving like a champ.
2- Use the 50/20/30 Budget Rule
This is the step following the previous one, now that you have a grasp of your income to expense ratio, it’s time to start creating a managing plan.
US Senator Elizabeth Warren from Massachusetts popularized the “50/30/20 rule” in the book “All Your Worth: The Ultimate Lifetime Money Plan.”
The 50/30/20 rule is nothing more than a division of your spendings by percentages, the concept is to allocate 50% of your income towards your needs, 30% towards your wants, and 20% to savings.
Needs are an expression for mandatory payments, the living expenses should take up no more than 50% of your after-tax income, if they do, it’s time to either downsize your lifestyle or to find another source of income to strengthen your finances and balance your income just enough to fit this rule, needs are expenses such as:
◣ Loan payments
◣ Doctor’s appointments
These are your dispensable expenses, 30% of your income should be channeled here, this involves anything that’s not needed for your survival and/or well-being:
◣ Subscription Services (ex: Netflix or Disney+)
◣ Gym Membership
◣ Clothing / Furniture / Home appliances
Last but not least, perhaps the most important part, your savings.
A modest 20% of your income every month will definitely change your life for the better in the long term, savings should be primarily used to create an emergency fund, in most common scenarios, an emergency fund will cover at least 3 months of expenses, once you’re comfortable and past your emergency fund, you can either keep saving more or for example, invest in:
◣ Mutual Funds
◣ Real Estate
◣ Private Lending
And the list goes on.
The ultimate goal for having all this work will be financial freedom, even if you’re not targeting being a future millionaire, the comfort of knowing the stretching point will do wonders for your well-being and drastically reduce financial anxiety, you will finally have control over your money and not otherwise.
3- Investing The Saved Money
There are several ways to invest and several kinds of investments, to keep it simple if you’re starting out, it’s a good idea to seek a financial advisor to help you with investment planning.
Investments will be your way out of the rat race, your way out of living from paycheck to paycheck drowning in debt, most people don’t even realize they live by these standards until it’s too late.
Companies that pay dividends to their shareholders are a good way to start investing, for every share you hold, you’ll be paid a percentage of the company’s profit, the time frame of payouts are decided by the company’s board of directors but the most important part is that you’ll start getting paid for investing and acquiring a taste.
After grasping the concept of investing, you’ll notice your investments starting to snowball and you’ll be generating more income as the years pass by.
Want to dig deeper on investing? I recommend you to have a look at these beginner-friendly books:
The Intelligent Investor: The Definitive Book on Value Investing.
Rich Dad Poor Dad: What the Rich Teach Their Kids About Money – That the Poor and Middle Class Do Not!
The Little Book of Common Sense Investing
Cryptocurrencies are another form of investing, one with great risk but also great returns.
I’ve conducted a small experiment to prove the power of crypto investing for the sake of this article.
On December 19th, 2020, I bought around $350 USD worth of Litecoin at Coinbase.
If you’ve been following the news, you already know the crypto market is growing like never before, Bitcoin is becoming institutionalized and big companies are starting to buy in.
I held the Litecoin without touching it as its value grew until January 3rd, by this time I had almost $100 USD in profit just by holding.
Later, I decided to move the portfolio balance to Coinbase Pro (absent of fees) to do some trading, the difference between both is simple, Coinbase is the suited place to buy and hold cryptocurrency, Coinbase Pro is for trading with reduced fees.
After a couple of successful trades and a couple more days, I had around $560 USD in my portfolio.
Since no investment is only about growth, this value has dropped to $467 USD since then, as the time of writing, cryptocurrencies have seen a decrease in value (like many times before) in the last couple of days as Bitcoin corrects from its latest all-time high.
I’m currently left with this:
For most people, a $100 USD drop would be the time to panic sell, but I do enjoy taking risks, so I’ll hold to see what follows up.
Wondering how to pull off this stunt or do even better than me? Sign up for Coinbase using my referral link.
You will get a bonus of 10$ worth of bitcoin after purchasing $100 USD or more of cryptocurrency.
Once you create your account, you can also invite friends and receive a 10$ bonus for each one.
Coinbase also offers you Cryptocurrency for watching a few videos to learn about altcoins and answering just one question for each video, the value will be sent to your portfolio immediately after answering correctly, make sure you don’t miss it, it’s free money!
Click on “For you” in the main menu.
On the right side of the screen, you will see this:
Just click and start watching the videos to collect your free crypto, you’re welcome.
The next and last step should be a no-brainer to snowball your savings even further.
4- Generate Other Sources of Income to Amplify The Previous Steps
When it comes to finding ways to innovate nothing beats humanity, we came a long way from living in caves and making fire with stones, just by being human we inherited the power of creativity, if you just stick to your 9 to 5 job you’re essentially giving up on everything that defines us as a species.
Everyone has a set of hidden skills that are being overshadowed by personal events and work routine, those skills could translate in a massive difference for income once put to use, turn down a notch the volume on social media and everything that needlessly consumes your attention, develop your set of skills with the free time instead.
You don’t have to leave the comfort of home to make money anymore, it’s easier than ever to generate side income online.
Allow me to introduce you to a few ideas, these are by no means get rich quick schemes, some work and time will be required to generate respectable income, who knows, it might turn out to be an exciting new career if you stick with it.
If you have:
There are some websites where you can sell stock photos, people from all industries and every corner of planet earth are searching for photos to use in their businesses, these are the best places to sell your stock photos:
1- Your own website
Nothing beats your own personal space where you control distribution, pricing and no one else takes a cut from your work, unfortunately, building your website from nothing and bringing it to a large audience will take loads of work and serious patience, that’s why photographers sometimes prefer to sell their photos on already well-established platforms.
This one needs no introduction, it’s the largest stock photo platform online.
Shutterstock has been around for more than 15 years and has paid more than 1 Billion USD to its contributors since then, the concept is simple, more quality photos = more earnings.
You don’t have to limit yourself to one option though, other platforms worth mentioning are:
3- Adobe Stock
The same concept is applied here, the best platforms to sell your drawings are:
If writing is your cup of tea, one of the best things to consider is to start a blog or to start freelance writing, the ideal is to be both a blogger and a freelancer.
Demand for outsourced content is a hot trend these days, by having a blog, it will be much easier to find clients as a freelancer, a blog is solid proof of your writing skills, possible clients might be interested in hiring you by looking through a couple of your articles.
How much can you expect to earn as a freelance writer?
It depends… Difficult topics tend to pay more but they also consume more time, if you’re just starting out, you can expect to earn anywhere between 1$ to 20$ per hour, as your writing skills and network of clients evolve so will your paycheck, some experienced writers may charge a whooping 2000$ or more per article, it all depends on how much work you’re willing to put in to get better at your craft.
The best website at the moment to start freelance writing without much hassle is Fiverr.
Just because you have natural talents doesn’t mean you have it all figured out, it’s important to start doing something now, never give up and keep working on tweaks and improvements every day, the world is a competitive place where laziness is heavily penalized, thinkers, doers and risk-takers are the ones who experience stronger emotions through life, they live to the fullest while exploring their dreams, why won’t you too?