Thoughts on Saving Money in Your 20s

Fast approaching the end of my 20s, I am in a good position to reflect a bit on savings in our 20s.

Is saving money too much for you handle?

Is saving money too much for you handle?

Saving is often discussed together with investing. While they may seem inseparable, we should distinguish between them. Saving is a learned behavior, a habit, and a discipline.

The habit of saving needs to be built up and then it becomes the foundation for future investing.

Having money saved in your 20s, and moreover, programming the habit of saving in yourself is the foundation of your financial future to come.

That said, to start saving, first you need to be clear about two things…

  1. How much you are making — This one should be easy for most people in their 20s because it comes from paychecks, calculating from the after-tax income rather than pre-tax.
  2. How much you are spending — For this one, we can first jot down the fixed part of the monthly expenses. For the variable expenses, spend a few months to learn the range and from there you can learn what their averages are.

Learning about these two things are required! If you really have strong intention about saving, you should be able to overcome both the resistance to sit down and track them and also the unwillingness to learn more about your personal finance… so that you are giving yourself the opportunity to self-denial.

Knowing how much you earn and spend leaves no room to question whether you are saving or not. In other words, doing so will help you to live within your means.

I know this seems very basic but basic things may be the hardest.

If you can keep tracking and maintaining your expense below income consistently staring in your 20s, there is no doubt that you will be in good shape.

You must have a saving account, or else...

You must have a saving account, or else…

Having a saving account separate from checking account and seeing the amount grow could be exciting… at least for me, because it’s similar to what one does playing video game.

That said, I think everyone is different and we all have different preferences and therefore, we will all maneuver in the gap between the money earned and the money spent differently for which I will break it down into three saving approaches.

Note, there is no “right” approach. Rather, it is more about understanding yourself and picking an approach that works for you.

Extreme saving

This is the most unlikely scenarios for people in their 20s because of the amount of discipline and sacrifice usually required to do it — like saving 70% or more of income. Not only is the discipline hard, I find it essential for the person to have identified clearly what they want out of life — like KNOWING you want financial freedom as early as possible — to subject himself through the process because otherwise, it may feel fruitless later on.

If you want to do this… ask yourself, for what purpose? Binging on anything could be unhealthy.

Slow and Steady wins the race

I find what I do fall more into this categories. the idea is to consistently save a good amount like 20-50%, on average. There will be months where it’s not possible but this is a balanced approach where you plan for the future while still able to enjoy things you like in the present.

Save minimally

If you’re in your 20s, perhaps your income is just not far above your expense or you are more into the experiential now, it is okay. Still, take the opportunity to learn how to consistently save by putting away 5-10% monthly into saving. Practice makes perfect.

As a last mention that really does not belong as a “saving approach,” there people who live paycheck-to-paycheck or even go into debt by overspending.

Without talking too much into debt here, it is safe to say that it is best for anyone in their 20s to stay away from consumer/credit card debt if they can help it. Not only will you not be saving, it takes away your future potential savings by having you to pay interest over time. Definitely try to minimize debt in your 20s.

Forget Kin, listen to me.

Forget Kin, listen to me.

At any rate, I leave you with what Bruce Lee’s father had said to him…

If you make $10 this year, always think to yourself that next year you may only make five dollars — so be prepared.”

And that… is why saving is a good habit to have.

What do you think someone in their 20s should know about saving?

Originally posted 2013-01-28 00:32:50. Republished by Blog Post Promoter

Holidays, Commercials, and Consumerism

Watching TV, we see commercials.
Listening to radio, we hear commercials.
Surfing online, we see online ads.
Driving on the roads, we see billboards.

What do most of these commercials and ads have in common?
They are telling us to spend!

This past weekend is memorial weekend. Along with New Year, Valentines, Independence Day, Thanksgiving, Christmas, and all the other special days and holidays, what do they have in common?

All the stores will be enticing us to spend money with deals on those days!

I am not against spending. Hoarding money is not our purpose. I believe in spending money to reach a certain quality of life that bring us and people around us happiness, so long as we follow the simple rule of spending less than what we make, distinguish want from need, and/or really understand that the things we are purchasing WILL increase the quality of life. For example, I love music, so mp3 brainer is a no brainer. It is okay to spend!

But observing all the ads/commericals and holiday deals, I am amazed at what these marketers are doing. In this age and days, they have associated the idea of spending with saving. If you pay attention, most of these ads basically say something like “Spend $x to purchase [item] and save $y” or “Get this deal and you will save x%”. Obviously, they want to manipulate/brainwash people into thinking that buying these things will save them money. It would be true IF all those items are a necessity in life.

Maybe I am pointing out the obvious, but I think it is important to point it out in order for all of us who are in pursuit of financial freedom to be clear and understand not to fall fow it :)

Bottom line is, Spending does not equal saving.

Originally posted 2007-05-28 22:32:12. Republished by Blog Post Promoter

Most Basic Rule to Personal Finance

Spend less than what you make.

A very very simple way to explain this… If we compare two persons, one making $50,000 and spending $45,000 and the other making $100,000 and spending $105,000, who’s going to be better off and has more money?

Now to be able to do that, it means following one or many of the behaviors below:
– don’t spend more than your monthly salary
– tracking your finance (money in-flow an out-flow)
– have a monthly budget
– distinguish wants” and “needs”
– try not to “borrow” from credit cards
– pay off any “bad” debt at high interest rate

Originally posted 2007-02-26 23:24:44. Republished by Blog Post Promoter

When the Intention is Pure, the Action Follows

For every action in this world, there is an intention behind it.

To know yourself, it is very important to be aware of this intention behind each action. Therefore, to choose which action to take, one can first decide on this intention.

Notice I used the word “pure” instead of “good”. There lies the key because purity has nothing to do with good (or evil). What action follows the intention may not always be considered “good”, at least at certain time to certain people. So by pure, I mean to the degree which you are aware — of yourself and reality, as they are. Hence, if you are going to be evil, how pure can you be, act, and follow through on your evil intention.

Also notice that I also used the word “intention” instead of “thought” because the thought behind the action may not be the true intention. We have gotten too proficient in deceiving ourselves with our minds. Therefore it is important to examine the thought behind the action to be aware whether that is true intention. We must be honest with ourselves.

For example, charity donation. It is often discussed, especially on personal finance blogs, as many have it as part of their budget. Some questions I could think of for that is (for you to explore but not for me to answer and decide right or wrong)…

Is it to be done because we SHOULD?
Is it to be done because we will feel good about ourselves?
Is it to be done because others will cheer and praise us?
Is it to be done because of tax breaks?
Is it to be done because we feel guilty of all these “stuff” we have?

Or, is it to be done because we are truly compassionate about people out there who are starving, malnutritioned, without homes, without education, etc.?

One other quick example is… behind many actions that we take, how many of them is all about money? I understand we have to be practical in life, which is why I have a job, but I cannot help but wonder, money… is that all there is to our life?

Learning about yourself. Learning about your true intention. Finding that pure intention is important.

Acting out of that pure intention leaves no room for regret because that means you fully understand the circumstances and is making the best choice, and that choice is solely yours. As a result, you are also being fully responsible. It leaves no room for “I should have this, or I should have that” or “So and so told me to do it” or “If I had known better…” (because you could not have know better if you were already fully aware)

Therefore, “When the intention is pure, the action follows.” Given that the person is being honest with himself about his intention.

It will also do us well to be observant and fully aware of others’ intention behind the actions. That way, we know who are friends, and who are… not-so-friendly.

Lastly, I want to link this to the law of attraction. The law of attraction has been thrown around A LOT. Consequently, “affirmative thinking” has also gotten pretty trendy. Maybe it works for someone but I don’t believe in “affirmative thinking”. What I believe is that the true mechanism of attraction… lies in this pure intention. Thus, to make the law of attraction works with you requires awareness.

Whatever type of TRUE intention you have, things and intentions of the same types will happen more frequently. Note again, intention can be different from thought, especially for people who barely know themselves. If your true intention means well, better things will more likely to happen to you. Likewise, if your true intention is one of anger, hatred, selfishness, more of that will also happen to you. If the intention is half good half bad… I suppose that cancels out.

And well, if you don’t know your true intention, then everything around you probably seems to happen at random.

The paradox is though, if you go around doing good things because good things will happen to you, that is a selfish intention… and it also falls back onto the “agenda mindset” that I talked about last. Something I leave for us to think about.

Originally posted 2009-04-10 23:54:49. Republished by Blog Post Promoter

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