13 November 2013

The State of Your Economy

In simple terms, you don't need to worry about the national and international economies, you need to worry about your own personal economy. Worrying about what we have no control over is a waste of energy. Worrying about what you can fix - your money, your financial situation, your lives, your personal economies - is energy well spent. There is so much you can do to reach financial freedom, even in economically challenging times.

It is time to save yourself and you can do that by saving. If you have never saved before (and there are many, many people who haven't) you'll need a plan. Without a plan all your good intentions will be just good intentions and you won't ever reach your goal of saving.

Funny thing is when we all, as individuals, look after our personal economies, then our national economy will look and be a whole lot better too.

Step one is to choose your goal. You need a reason to start saving.

Step two is to break your main goal down into smaller goals. For example if your main goal is to save six months of living expenses, your first smaller goal could be to save $500 in six months. Don't leave it there. Break it down into a more specific and measurable goal. "I am going to save $500 in six months by transferring $20 each week to my savings account." This is a measurable goal. You can look at the balance of your savings account any time and see just how well you are doing and how close you are to achieving your goal.

Step three is to pay yourself first. This is the hardest part of saving for most of us to understand. It is very hard to reconcile paying yourself and saving as important when you have debts that need to be paid. Honestly, developing the habit of paying yourself first is the smartest habit you can develop. You need to be building your savings so that you won't ever have to rely on credit again, this is the most important thing you can do for your own economy. I am not telling you to stop paying your debts. I am telling you to re-prioritise the order you pay them in. Until you have at least 6 months worth of living expenses saved in the bank, paying yourself is the number one debt you have.

Step four
, and this is the fun one, is to watch your savings grow. It is so exciting to see your goal get closer and closer. When you check your savings account balance and see that money mount up you'll feel a sense of pride in your accomplishments and you'll find your attitude towards money changing for the better. Having money in the bank will no longer be something that only "rich" people have.

If you are not convinced that a measly $20 a week can add up to anything substantial, take a look at these figures.

If you save $20 a week at 5.25% interest until you retire in 30 years you will have a whopping $78,222.62 in the bank!

If you double the payments to $40 a week you will be retiring with $154,031.78.

Now increase the interest to 9% (interest rates will rise, have faith) and you'll have saved $327,296.90. Actually, you will only have contributed $62,900 to this amount. What you will have done, by regular saving, is earned a whopping $264,496.90 in interest, all because you saved a little regularly.

Now that's a stable economy!

Saving money is habit forming, and it's a good habit, a much better habit than spending constantly. The simple act of saving money gives you a sense of self-worth and an incredible peace of mind. Money in the bank gives you dignity and  a sense of satisfaction that outlasts any good feeling you get from compulsive spending.

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