Managing your money?
It is a natural behavior we often see on people, even ourselves, we have too much of thinking when we are dealing with money. Things like,
“I am going to become independent free by 30s”
“I am going to earn 1 million by 30s”
“I am going to save a thousand by year-end…”
Sound familiar, eh? This is what struck many of us. Yea, of course, you’ll require planning, but it alone simply is not enough, you wouldn’t see any tangible results before you start to manage it to work for you.
You see, most people know that they should be managing their money, yet they never seem to get started, they kept procrastinating. And always reason after reason…
“Yeah, I probably should get started after blablabla…”
“But I am not trained/educated for this…”
You might question and said, “I don’t need to manage my money, I have my financial advisor/manager”, truly I don’t understand, it is your own money you are dealing with, and you paid people to get your money managed?! Well, screw those ‘expect’, if you’d care to do some research, you would find that these supposedly professional exist to ‘milk’ from their clients. So when you’ve been having an affair with these professionals, no hard feeling, but I guess you aren’t concerned about being rich after all.
Money managing is important that it deviate the rich and the poor, the rich actively manage their money, the rich had become richer because they have managed their money to work for them while the poor will simply work hard for it. As simple as that!
“Starts managing your money? How?”
Admittedly, money managing is a big topic, in fact, there are tonnes of books in the market where you will find yourself bathed in a pool of information, but remember this information alone is not enough when it comes to managing money, it's too attached to your psychology and behavior around saving, spending and investing, and I am well aware that it is damn hard to change one’s mindset and behavior. As such What I am sharing here is a system for you to get started, a system where you could start building your wealth, and eventually more time, energy and peace of mind to enjoy the things that really matter to you~ be it travelling the world, learning to play piano, or simply hanging out with friends and family.
Key to the system – automation
Most of us would admit that we don’t have a ton of free time on our hands these days. With the free time we DO have, very few of us want to spend it dealing with our finances, as it can become repetitive and boring, and you can become stressful when managing your money.
Thankfully, there is a system called automatic money management, it isn’t something new, and make no mistake, this will not get you rich overnight, rather it is a system where Your behavior of spending, saving, and investing will all be automated.
So let’s get started, the idea of automation is easy. Through a simple and pain-free process, an automatic system can make ‘repetitive’ or ‘boring’ a thing of the past. The idea is simply to work up to make money flow automatically, so with Automatic system, you can
- Set your money to automatically fill up your savings account and investment accounts without doing any additional work.
- Set recurring payments to bills or credit card without worrying about missing the due date.
- Let yourself focus on the things that really matter — learning to new kinds of stuff, hanging out with friends and family.
Believe it or not, knowing this alone, you’re probably way ahead of 90% of people or more. But before the system can be making sense, like every other thing, you must convince yourself to persevere, and be committed to the system so you will be able to execute them and successfully getting control over your finances! So let’s explore more about it!
“Automatic transactions are your best pal.”
You see, thanks to every modern bank these days support automatic transactions, be it direct deposit, automatic transfers to your savings account or investment accounts, auto bill pay or automatic retirement fund contributions. It is so helpful that it minimize our trips to the teller window or the time you spend on your bank's website, set up transactions to occur between your accounts without requiring action on your part, and you’ll still have total control, but this system will just work automatically.
Retirement Contribution Plan
The first thing in the system is the retirement contribution plan, in concerned about the well-being of people in their retirement, most countries have set up this retirement contribution plan, whereby the employer and employee will fund the account. A percentage from an employee paycheck will be automatically funded each month should they opt into the plan.
One reason we don't save money is the pain of putting money into our savings accounts each month. If you put off saving, or never save more than 2 or 3 percent of what you bring in every year, or worst, repeatedly spend what you have saved- you could easily face the prospect that you will need to keep working much longer than you expected and that you could run out of money in your old age.
Thus paying yourself first is the important steps. By linking and set up an automatic transfer from your checking account to savings account, saving become much painless. It could be a fixed amount or percentage or whatever you think you can afford. With this, you could easily save up for your financial goals, be it short-term or long-term, you are saving for your own very special future!
Bills, Credit Cards Payment
With saving in place, compiling and combine all bills or credit card payment in one place is the next thing to do. It’s simply a matter of setting up recurring transfers for the correct times and amounts from your account to your Bills account.
What if bill fluctuates from month-to-month based on usage? Public utilities, for instance, this would make setting up an automated payment from your bank to be very difficult. One way to do was simply charging the bill to the credit card, or simply set up reminders for any actions that can’t be automated.
Investing Account, Individual Retirement Account
Here comes the most important part of the system, where you would put your money to work for you! So the same applies when funding your investing account or individual retirement account, whereby it is easily set up for the Mutual Fund Company and most online stock brokerage
You could automatically debit your investing account after every paycheck’s is deposited. Most brokers have no minimum balance requirements to get started; in fact, there are brokers that offer no transaction fee, no-load funds so to stay competitive. Better yet, most brokers offer the dividend reinvestment plan, which will automatically reinvestment dividends for free. So instead of being stuck with one fund company, you end up with a wider selection and helped to keep your cost as low as possible, for instance, you could select index fund that charges minimal fees is great for entry.
Automatic investing account work as simply as:
- Pick the funds you want to invest in the fund companies (i.e. Vanguard)
- Set up automatic transfers from your account to the fund company
- Automated investing applies the drip feeding method of investing; a fixed amount of investment was bought at regular intervals at the current price. So you wouldn’t worry if the price goes up or down!
So let’s summarized the process in simple infographic below:
Start from the time you receive your paycheck until the monies get spent or bills get paid. Your money management is now on autopilot. Without thinking, your money is systematically saved from every paycheck, before you get paid, and invested in funds you chose and your bills automatically paid and on time.
The beauty of this system is that it works without your involvement and it’s flexible enough where you can tweak it to your specific situation by adding or removing accounts anytime. With automatic money management, you’re accumulating money by default, and money itself will be making money on your behalf!
“It is a no-brainer system!”
Trust me when I mentioned the system will be a life changing! By following the system, check out how you could make your first million.
Becoming a millionaire is as simple as you could imagine! What do you need to do to achieve this? By setting up an automatic transfer, monthly transfer to both your saving account and an index fund of your choice. Of course, you might argue when seeing the number, “how is it possible for me to save $10000 a year, and another $10000 for investing?” quite common particularly if you just started your career.
But it is tweak-able, you could start-up small, and building it up when your income increase. Notice what I am showing here is rather conservative, with a fixed amount and not a percentage of your salary. Another info to note is, the rate of saving shown, too, are conservatively on the low side, do the research and you would find one that offers a better rate.
As with the rate of return of 7%, that is well below the average of a market, US stock market for instance. And better yet, you could easily achieve the rate of return of more than 10% should you diversify and invest in income and growth stocks.
With that, it is a no-brainer system for one to become a millionaire! Now let me tell you another good thing, now we are just looking at the saving and the investing part. Not to forget, we still have the retirement contribution plan and the individual retirement account. You could literally become a millionaire by 40s.
But 20+ years is a long wait!
What if you feel like 15 years is a long wait, then you might think increasing the saving and investing amount is the only option in reducing the time frame. Well, cut the bullshit of saving more. Understanding this, there’s a ceiling of how one salary can grow. And what happened during the time of recession? Depending on just your salary is a bad idea! You will need another game plan to grow your wealth in times like this, and worry not; I won’t be asking you to spend less or cutting expenses.
How then? You see this system could be perceived in two parts. We have already discussed the first part, pretty much about your active income. Now come the second part, is to create one asset that most people will never have, that is to generate side income via a side project or business of your own while doing it part-time, in fact, it could be as easy as freelancing with the skills you’ve already developed.
If you are determined enough and do the research, you would understand that the internet and mobile technology is where the opportunity lies. And you would find that the barrier to entry is ridiculously low. You don’t need a degree; you don’t have to get a license like a stock broker. More importantly, you don’t have to invest a huge amount of money!
Even if you mess up, the loss is relatively small, if you keep going and learn from your mistakes, you will have an opportunity to start making money on the side. And once you have reached such state, remember to put aside parts of the side income to your investment account. While concurrently scale up your project or business, reinvest the money into it!
Wanting to know more?
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“People do not take action until the pain of their current condition- whether poverty, boredom, fear, or happiness- exceeds their fear of taking action and reluctance to make a change- The observation is right on the money”
Don't wait until that moment, it will be too late to get started when you notice!