Many people complain that they just don’t have any extra money to invest or save. Personally, when someone tells me this, I find it very difficult to believe. I come from a background of very modest means and since my first job as a paperboy in my pre-teens making $10 a week, I have been able to save and invest some portion of my money. Quite frankly, the vast majority of people who have no savings or investments make this choice (maybe unconsciously), but it is no less a choice and they shouldn’t view themselves as a victim of circumstance. Now I know there are some rare exceptions, where someone may have had a brush with bad luck and were wiped financially by some unfortunate event, but I’m taking about the general population at large. So how do I find money to invest? Well, it’s really no secret, I treat savings as an expense just like any other expense you may have — a tax, mortgage or utility bill, something must pay. Before every pay period, I routinely set aside a set amount for my savings and investments and siphon it off to a separate account and never touch it, and I mean never. When I formed this habit at a relatively young age, it forced me to live within the remaining income. As I began to see my savings and investment accounts begin to grow over the years, the habit became even more addicting and I continue to increase my savings “expense” anytime I receive a raise or bonus. Having done this for over 20 years the results have been pretty astounding. In a future post this year, I hope to tell you how just how astounding it has been.
Therefore, the first step in any successful financial planning is to determine where to find the money to save and ultimately invest, which most likely is already under your nose. As I mentioned above, what works for me is every paycheck I receive I create a savings “expense” and pay it off just like I would any other bill – and never, ever, touch the money. But you say, if I did this, then I wouldn’t be able to pay this bill or debt, which then begs the question, “Are you living beyond your means?” I’ll address this question in a future post.