Money and the Principle of Delayed Gratification!
Money is a sensitive subject. But it shouldn’t be. Whether you grew up talking about money or not, the inevitable is true–money matters. The saying “money doesn’t buy happiness” isn’t 100% true. While it is TRUE that money does not buy fulfillment, nor should it be the most exuberant form of “happiness”, you do require a certain baseline of money to provide essentials for everyday life. Without these essentials, life is pretty tough.
As we age, we ideally take on more financial responsibilities, With that, our income should ideally increase. My first job was a golf caddie at age 14. I made $18 for 18 holes plus tips. Obviously. at the age of 14, my expenses were quite low.
Fast forward now–I have a mortgage, grocery bills, insurance bills, utility bills, gas costs, car costs, phone bills, two kids, and many more variable things that cost money.
Fast forward to the future…I will be retired. Guess what? Most of those expenses will still be here? So how do I pay for them when I don’t have income from working?
By saving NOW.
- “In the house of the wise are stores of choice food and oil, but a foolish man devours all he has.”–Proverbs 21:20
It can be pretty daunting to think 10, 20, 30, or even 40 years down the road, but as a responsible adult, you have to.
What kind of life do you want to live? When do you want to retire? What do you want to do when you retire? All these things play a factor into how much you meed to save and how much you will need at retirement.
Now that you may be a bit overwhelmed, let’s take a step back and start small.
Have you saved any money for an emergency? According to stats from 2019, 60% of Americans wouldn’t be able to cover an emergency $1000 cost. This is a problem.
This is also where you should start. Create an emergency fund and get $1000 in it as fast as possible. You can open a savings account with your local bank, or for even better interest rates (free money) consider a free online saving bank such as Ally.com.
If you are struggling to think of where you will get $1000 from, look at where you currently spend.
What are your NEEDS (or things you HAVE to pay for) and what are your WANTS (things you don’t NEED). If you have to, cut from your “wants.” Even by cutting about $80 per week, you cam have $1000 saved in about 3 months.
This may take some planning, sacrifice and delayed gratification–but the sooner you learn this, the more financially free your future will be. Discipline now equals freedom later.
Once you get your first $1000, the usual recommendation is to get your emergency account up to 3 to 6 months worth of monthly total expenses. Don’t freak out about how long this might take, just get started with what you can, and made adjustments 2 to 4 times per year.
From there, your next step should be to set up accounts for long term savings/investing and short term savings.
Long term examples would be 401k’s, IRA’s or Roth IRA’s.
These are accounts that you don’t plan on touching until retirement. If your employer offers a 401k with a match, make sure you are contributing at least enough to maximize the match (it’s more free money.)
Depending on your situation, you could either open a ROTH IRA or traditional IRA. If you have no clue what these are, I suggest reading the link below:
Just like your emergency fund, don’t get overwhelmed with the max numbers and just get started with whatever you can. Your eventual goal should be to maximize the amount of money you contribute yearly.
Short Term examples might be a down payment on a housemm car, or even a big vacation.
These accounts that you plan on withdrawing the money from within several years, so use the same online saving account setup s you did with your emergency payment, but just create a new “bucket” for these options.
You ca easily do a little “reverse engineering” to figure out how much you will need, and how much you should be setting aside.
Let’s say you want to buy a $400,000 house. You want to put 20% down. That’s $80,000! But if you start thinking about getting a house 5 years before you actually want to get it, this is $16,000 per year or $1,333 per month or $307 per week.
I realize this is still a large amount of money, but sometimes it helps to break it down like this to figure out if it is even feasible. After doing this, you might decide that is too much money, so maybe you hold off on the house for another year. Now this is $1,111 per month, or $256 per week. Reassess, and figure out your numbers.
- Jesus said-“Suppose one of you wants to build a tower. Won’t you first sit down and estimate the cost to see if you have enough money to complete it? For if you lay the foundation and are not able to finish it, everyone who sees it will ridicule you, saying, “This person began to build and wasn’t able to finish.”-Luke 14:28-30
Don’t Spend Money You Don’t Have…and Credit Cards.
Some very well known financial experts are anit credit card. And for good reason! Credit card debt is at al all time high in American, and the interest rates on it are insanely high.
That being sad, if, and a BIG important IF, you pay off your credit cars in full monthly, you can earns some serious perks and increase your credit score–which can save you tens of thousands of dollars down the road. For example, I use Amazon quite a bit and shop at Costco, 3% back on gas anywhere, and 2% back at restaurants.
I still make sure I pay it in full.
I hope you understand the point and how serious I am. Pay your credit card bills in full, and do NOT overspend what you cannot pay back. If you are afraid that you might do this, then credit cards are not for you.
There are many credit card options out there, but your best bet is to do your research hand find one that works best for you. I recommend using Nerd Wallet for this:
The biggest investment you can make is you.
With all this talk about saving more money and earning more money, at the end of the day your personal earning potential will be the biggest source of income for most, if not all for your life. The best investment you can make is in yourself.
Improve your skills. What problem are you good at solving or helping others solve? Are you currently monetizing your skills and passions? If not–start a side hustle. You might even do it for free to get some initial clients.
Improve your market value. Maybe you work a job that pays based on credentials or experience. Can you level up your credentials to earn and additional; $10,000 per year? You may have to sacrifice up front to pay for more schooling or certifications, but if it pays off in the long run it’s a great investment.
If you sped time with focused, successful, driven, and good people–you become more like them.
At the end of the day, money doesn’t have to be intimidating or stressful. Just remember this:
- Start early
- Start with anything
- Keep growing
Submitted by: Mike Gorski
