When your paycheck hits your account each month, what’s the first thing you do? Do you splash out right away? Pay your bills? Perhaps you save first and enjoy what’s left. Or spend and then try to save. But how many of us make investing our salary our #1 priority?
How you answered these questions will show you right away how you can improve your money habits and start building your wealth. Because if there’s one thing I’ve learnt about money is that it’s constantly on the move. It hates sitting still.
And if you make the mistake of not directing your money precisely where it needs to go (ahem, your investment account!) then it’ll disappear. No joke. You’d have paid your bills, dined out, enjoyed a couple of drinks, oh and a bit of shopping (it is sale season after all, right?) and poof, your money’s gone. Just like that.
Which is why you’ve gotta be intentional with your money. Otherwise, you’ll end up in a sticky mess that will be hard (and expensive) to climb out of. One that’s riddled with debt and stress.
We’re doing it all wrong and it’s killing our finances
What most of us do when that gorgeous paycheck hits our account is spend first, save second and invest last. If at all. We blow a hole in our salary. We spend on today without caring (or thinking) about tomorrow or next year.
Credit cards put this problem on steroids. Not only are we not shovelling our salary for our older self (the one that would probably like a roof over their head!) but we’re buying things we simply can’t afford.
Part of this is wanting to fit in. We see our colleagues wearing swanky watches and taking fancy trips that we want a piece of that. And when we start earning our own money, there’s a massive freedom that comes with it.
But there’s also a huge responsibility. If you don’t build good money habits early on, you’ll be stuck with the after-effects for who-knows-how-long. The only thing you should be worrying about is building your nest egg.
Don’t worry what others think of you. You haven’t seen the inside of their bank (and investment) account and they’ve not seen yours. All what you’re seeing is what you want them to see.
If you can do the opposite; invest first, save second and spend third, I guarantee you your life would change dramatically. You might not see the results at first but you’ll be building a nest egg for yourself. You’ll have peace of mind knowing you’re investing for your future goals and the confidence that your money is working for you.
It’s easier than you think
Automate your paycheck to go straight from your bank account (savings = low risk, low return) to your investment account (stock market = high risk, high return).
If all you do is save, you won’t really get anywhere. Not with inflation at ~10% fighting for your money. No way. Make sure that you’re spending your paycheck on the important things first. Everything else can come second.
The bigger the % of your monthly paycheck that you can send straight into your investment account, the richer you’ll be later on. It’s that simple. It’s so much easier to scrimp and scrape when you’re young than when you’re old.
When you’re in your 20s, you can make do with loads of things like a car, fancy holidays and so on. But as you get older, not having a car can start to get pretty annoying and you’ll start to resent your budget holiday packages.
Living on a shoestring can’t go on forever. Nor should it. If you were careful enough in your younger years, investing as much as you possibly can, this will literally be your golden ticket to financial freedom. That by the time you’re in your 40s, you can sit back and relax.
I’m in my early 20s. I’ve just started my first job and I’m trying to be as careful with my money as possible! I don’t take fancy trips, do not own a car (I don’t even drive – I’ve had 2 failed tests and decided to ride that one away for now) and I avoid designer “stuff” like the plague.
But at some point, I’ll want to do things in-style. Sure, I could ‘technically’ afford a fancy vacay now (and by technically, I mean blow my entire month’s wage) in NYC during the holiday season – something I’ve always wanted to do but it honestly doesn’t make much sense for me to do it. Not right now anyway.
The key is to delay all our wants (that we confuse with needs!) now for something so much juicer later on. You’ve gotta strike a balance and splash out here and there (I’ll be taking that Christmas vacay for my honeymoon!) but spending must never be your priority. Investing should be.
Building and growing your net worth involves sacrifices. You can’t have it all. When you’re starting out, you can’t go to swanky bars each night, have perfectly manicured nails with Chanel handbags and a Merc PLUS a whopper investment account. It just doesn’t work.
We all wanna look rich but how many of us are willing to look the total opposite in order to real rich later on? Less than it should be.
Don’t be afraid to do things differently to everyone else. Resist the urge to follow the crowd and you’ll be happier.
Dear reader, get used to paying yourself first. Get in the habit of building for your future before spending on your present. Or even worse, paying off your past.
Your 9-5 can make you rich. You’ve just gotta give up a little today. And I’m okay with that! Are you?
Disclaimer: This blog is not investment or financial advice. It is my opinion only. This blog is not a personal recommendation to buy/sell any security, or to adopt any such investment strategy. Always do your own research before you commit to any investment