Many people think there is some magic bullet or “secret” information that will help them achieve financial independence. (They also keep looking for the magic pill that will keep them thin or the miracle cream for beautiful young looking skin.)
We all want easy answers without having to work at it or make any changes. My experience has shown me that this is not how it works. You do have to make changes and take some consistent positive action to achieve a goal. The trick is to make that consistent action as easy as possible for you. You want it to be something that happens without your having to even think about it.
Even when things are dropped in your lap, like winning the lottery, it rarely solves the ongoing problem. This is because the behavior pattern over the long term will eventually take you back to the same situation again and again.
So the answer is something you probably already know but are not doing or think it is more complicated than it is. The key to financial success is SAVING. If you spend less than you make and save at least 10% or more (15% if you are 40 or older) every year you will achieve financial freedom.
That is it. It is that simple.
The key to financial independence is living within your means.
Spend less than you make and save money for the future and you can achieve financial independence.
Yes, it is that simple. Even a little bit of savings will accumulate and grow into significant savings over the long term.
If there is one lesson to teach your children early and start working on yourself, it is this. Set up automatic savings. Start living within your means. The more money you have set aside, the more that money will be paying YOU later in life. One way you can have more money in the future is to save more.
I cannot over emphasize this enough. You MUST pay yourself first. Your future self will thank you.
So what is getting in your way? Why aren’t you doing this? If you have questions or want help, please let me know. I would love to help.
Set up automatic savings. Set a percentage and make that money go into your retirement account. If you don’t see the money you will learn to adjust to live without it. The trick is not to touch this savings no matter what.
I know it is something that is easy to put off and does not feel urgent now but the sooner you start the better. Everyone knows that they should save and yet so few do. Many do not think that they can save more. I am telling you that you can. Yes, it is simple but for many it does not feel easy. In the next couple of weeks I will give some different strategies for you to try to help make saving easier.
Today, all I want you to do is decide how much you want to save. What percentage are you willing to commit to? I want to challenge you to take some action. Think about it and decide how much you want to start saving. That is all. Write it down. And we will take the next steps in the coming weeks.
And if you are already saving, good for you! Congratulations. I hope you are not one of the extreme people who are so focused on saving that you are not enjoying your money. I am emphasizing the importance of savings yet I also believe that it is a balancing act. As with anything, you can take savings to an extreme that is not good or healthy (or fun). You should enjoy your money AND save some. This is the topic for another article. Oh so many things to write about…
Albert Einstein once said, “Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it.”
The Power of Compounding Interest Example
Two twin brothers, Ned and Ed have just turned 65.
Ned opened a retirement account at 20 and invested $4,000 annually for the next 20 years and then just let it grow. Assume it was growing at 10% each year.
Ed did not start saving for his retirement until 40 when Ned stopped saving. Ed saved $4,000 per year for 25 years. It is also assumed to grow at 10% each year.
What do they both have at age 65? You know where this is going. But how big a difference is there between Ned and Ed?
Ned invested $80,000 (4,000 x 20)
Ed invested $100,000 (4,000 x 25)
Ned ends up with almost $2.5 million
Ed ends up with less than $400,000.
Ned has 600% more!
It is never too late to start. You can’t change the past but you can make changes today and impact your future for the better.
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