What is the fastest and most effective way to build a substantial savings?
Set up a direct deposit to take a certain amount out of your paycheck every month to go directly into savings. If it goes in without you being able to put your paws on it, you don’t run the risk of spending it. It’s fool proof. And, let’s be serious, we’ve all been fools with our money. Ideally the amount is 15% of your income but you can start anywhere and ramp up as you start feeling comfortable without having that money in your budget.
Also start naming your savings. Seriously. Change your mindset and your finances will follow. If you create “sub savings accounts” in your bank account, you can literally start saving for the “Mexico vacation” or “Holiday shopping” or whatever. That tends to get you more motivated to save because you start thinking about all the awesome things you’re getting from that savings rather than as a drag or another bill.
Three things that people can do in the first 3 months to get on track financially.
First change your thinking. I know it sounds like BS when you’re talking about a regular diet...like, “think thin to be thin” isn’t helping anyone if they don’t exercise and eat like crap. But, when it comes to your finances, start thinking of yourself as coming from a place of aspiration instead of deprivation. So, instead of focusing on not buying a latte and coupon clipping which sounds like zero fun, start focusing on making more money. Think of a side hustle. Hello, Captain Obvious, if you make more money, it’s no sweat to save the money you need.
Next, work on your credit score. Your credit score is your most important financial asset. It’s connected to the interest rates you get on your credit cards, mortgages and car loans. It’s essentially your financial report card. It’s also often connected to whether or not you can rent an apartment or get a job because a landlord or employer, respectively, will want to use it to determine how responsible you are. So, first check it and see exactly what you’re working with. Then, don’t cut up credit cards…instead keep ‘em alive and just put one recurring bill on them. You want to make sure you’re using only using a small amount of the max credit you have available to you. Also, I know it sounds annoying, but pay your bills on time. Seriously, it’s one of the biggest factors to acing your score.
Lastly, negotiate your bills. Yes, everything is negotiable. Your cell phone bill. Your credit card APR. Your medical bills. Just because it’s written on fancy letter head doesn’t mean it’s set in stone. Take a couple hours and go through your bills and ask for a better rate. It’s your hard-earned money, you might as well fight for it!!
"When it comes to your finances, start thinking of yourself as coming from a place of aspiration instead of deprivation.'
NL