Takes money to make money right? Well yea that is true. But what if you don’t make “a lot” of money or have thousands to invest in that hot stock tip you received?
Let’s start with the first step. Stop spending more than you earn. I know, totally crazy concept. I probably just mind boggled some of you. We won’t get into details just yet about how to curb your spending. If you want to invest, you have to get spending under control. Everything you purchase, even on sale, will lose value over time. It’s a fact. Your Jordan’s won’t be worth anything later and your car will not retain its value.
Create a budget right? Well first you have to know what you spend in order to know what you really can spend, save, and invest. Track every single purchase. All of them. Even the soda from the vending machine. There are apps, Excel, and plain old pen and paper. Whatever you use, track your spending. After 60-90 days you will have a good idea of what you spend your money on.
1) Track spending (60-90 days)
2) Emergency Fund (3 months minimum)
4) Save at least enough in 401k to get match from the company. If you don’t have a 401k than open an IRA or equivalent. More to come on that.
5) View every non-essential purchase from an hourly wage vantage point.
Hourly Wage: $20.00 per hour x 40 hr work week= $800.00 per week.
New TV: $2400.00
True Cost of TV: 120 hours of working to pay for that TV. 3 weeks of your life for the $2400.00 TV that will be essentially worthless in a few months time.
I’m not saying don’t get a TV. I have one and it’s still good but, I do want a new TV. However, I don’t need a new tv. It’s the Wants Vs Needs dilemma. I control what I want by looking at how much time working it will take me to satisfy that want. I then analyze if this purchase is truly worth that time. Time is valuable and time is money. Time can be on your side or its against you. Time can be spent having money grow in the market. Or time can be spent paying off debt. Choose how you want to spend your time wisely. And that starts with smart purchasing.
Personal finance, financial independence, and building wealth is purely behavioral. You have to want to do this and by doing this you will have to sacrifice those things you desire. Not all the time, but more often than most normally do.