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How You Manage Money, Part 2

Posted By: Randy GageAugust 12, 2009

One of the first money management skills you must develop is the one of saving.  This is the one I had the most trouble with.

I always believed that the reason I couldn’t save was because I didn’t earn enough money.  I kept telling myself that when my salary went up, I could start saving then.

Total denial.

You must save no matter what level of income you are at.  There are part-time maids who live in the projects, and still set aside enough savings to send their children to college.  And there are guys who pull down $150,000 a year and by the time they make their house payment, BMW payment and get their flat screen TV, they don’t have enough left over to save.

Bad management.

You must set aside the money for savings first, then live out of what is left.  If you do this, you will just naturally take care of the real necessities, and forgo things you can live without.

Now be clear on something:  I’m not talking about “saving up” to buy a car, a refrigerator or an air conditioner.  You can set aside money for stuff like that, and it’s a great idea, so you don’t have to go in debt for them.  But that is not the purpose of savings.

Savings is money you set aside and invest to build your long-term wealth and financial security.  It is the way you pay yourself, protect yourself, and value yourself.

So if you don’t regularly save, how about starting a regular plan now?  Ten percent is good.  Starting with your next paycheck is good.  Are you up for it?

-RG

27 comments on “How You Manage Money, Part 2”

  1. -RG,

    We "people in the USA" are getting a very hard lesson on saving. We are a country of spenders. I heard that 70% of GDP in consuming. We are not learning the value of saving and the "evils" of instant gratification.

    -djm

  2. I think I just don't get WHY I save, or WHAT FOR.

    You mentioned to save for "long-term wealth and financial security".. when inflation is at 5%, and savings is at 2%, all I see is LOSING.

    I honestly just don't "get it". When I read Kiyosaki, he mentions that "savers are losers".

    Moreover, so you accumulate a bunch of money- then what? Do you then buy some investments? Is that the idea? Your home, investment properties, a business? What do you save FOR?

    I recently read that if you "save for a rainy day", you are assuring rainy days.

    RG- how much do you SAVE? Seriously, I just need to be educated on this.

  3. I learnt about this philosophy many years ago through my involvement in network marketing. It was and is very satisfying watching my savings balance grow. Initially I just looked for a bank account that paid more interest. As the amount grew grew larger, I was able to place it into other investment vehicles. Along the way I am learning about economics and investing, it's a wonderful ride! I have a lot more to learn but I have learnt so much already. It really does make me feel good about myself and I am encouraged to save even more to make my next investment goal a reality more quickly.

  4. Dear Randy ,

    I do the the same as you mentioned in your today post, while I took apart in Palinure 1st leadership seminar in Dubai 2008.

    and really thanks for wonderful subject you mentioned in your site.

    Cheers

    Mojgan

  5. That right Randy....i learn to start my saving for my future and now I added 10% more for charity. I believe when we donate our income to other who need it will make oyr heart peaceful..I believe when we give other....it will come back to us more than that.

  6. Japanese are very good at this, but recently more young people are going for instant gratification and expending much more via credit card payments. Now there is a law where lending companies must check the amount of total earnings/income and are allowed to only extend a credit maximum in which that individual can pay up for whatever loan on credit. 10% is always a good start as the "Richest Man in Babylon." I like Ecker's saving another 10% for something to spend on pure pleasure! I have to admit that I still need to practice this saving of 20% better, so I don't need to worry.

  7. I don't get regular pay checks, I never know how much income I will earn each month (such is the nature of my work), so some months I manage to save and some when I don't earn much I don't. Over on this side of the pond the recession has hit people hard and they are just not spending.

  8. Randy, I got an opportunity to join a network marketing program. I was a bit apprehensive, but based on a post you wrote earlier, I realized it was my residual lack program in my subconscious holding me back, from taking advantage of it. So I ignored it, and went ahead.
    Now after doing a Bob Proctor exercise yesterday, where I described my life and finances as it is now, and how I want it to be, and tore up the sheet representing my current situation....I found another network marketing system...and I applied for it also. I am getting the interview soon. Thing is, I was a bit apprehensive about this second opportunity, because I felt you had to focus your attention on one just to make it work, and if you had multiple interests, you might be distracted.....but I seem to hear your voice saying...'why not have more?'
    Is it possible, to run more than one network marketing system effectively or is this lack programming talking?
    And about your post...my bank automatically deducts a fixed amount every month and invests it for me, so that takes care of savings. 🙂

  9. Was it Einstein who said the 8th Wonder of the World was "Compound Interest". I did a straw poll with friends recently and hardly any of them knew what Compound Interest was!

    Just cultivate the habit of paying a regular amount into an interest bearing account and, notwithstanding the current low interest rates, you will be on the road to being wealthy.

  10. Your home, as an example, isn't an "investment". It's a liability. IF You rent it out, then it's an investment.

    To save money "to a bankaccount" isn't the "ultimate investment".

    Go check out stocks with dividends, then You can get a "direct cashflow" (dividends) wich You can re-invest and a long term capital gain.

  11. I agree completely.. I focus on being debt free and maintaining a low overhead, also. This way I can manage my finances, be able to enjoy a few luxuries, but also save money as well. No need in paying CC card interest rates, when I could have the money in an interest bearing acct. Even though money market or savings rates aren't that great, it's better to GAIN interest than lose it.

    Thanks Randy.

  12. Hey Randy-
    If anyone has kids, I learned a fantastic parenting skill around money management when my daughter was born. ( I learned a lot for myself in the process of teaching her as well )

    From the time she was 5 we gave her an allowance simply so she could learn about money. It was never attached to chores or behavior. Those where just expected as members of the family living together and we wanted to avoid any extra dramatic meanings around money's purpose.

    From her allowance she was required to save at least 10%, put aside 10% for charity or tithe, and the rest was hers to do what she wanted. If she saw something she wanted she could decide for herself if she wanted to spend her money on it.

    She learned that she had the power to choose if she wanted to "save up" for something special or keep buying smaller items. It also meant she wasn't always asking us to buy her things.

    At 5yrs old, she bought her very first Barbie all on her own after going to the store, figuring out the total w/ tax and how long it would take to get the rest saved up. She then began negotiations for ways to make more money so she could get to her goal faster:)!

    She also gave money for years to a cause she cared about and began her savings acct.

    Now that she is a teen and has a job, she has that same mindset instilled. She also is very aware that she loves earning money and can be generous and decerning at the same time.

    I wish someone had taught me ANY one of these skills long before my 30's. Imagine how much different things could be if kids where taught some kind of money management or checkbook balancing skills in Jr. High or sooner.

    Hope this was helpful to someone.
    Jeanne
    PS. BTW- The best book that helped me learn and instill new money management habits was definately, The Richest Man In Babylon by. In fact I think I will read it again.

  13. A good alternative to long term investment aside from bank savings, stocks, housing is Pre-developed Land.
    Land is zero terminal failure. It cannot depreciate. The answer to inflation is Landbanking.

  14. Landbanking, yeah! I have been more grasshopper than ant in my life, so now that the fall of life is approaching we have to carry on working when we can. No regrets, it has been a great life with more to come. (I am 66)

    Financially, the only smart thing I have done is to buy land when we could. If we absolutely had to we could sell half our acreage, solve all financial problems, and still have
    our own 5 acres left.

    I have always had more faith in the potato standard than in the gold standard.

    But if I could do things over, yes, saving 10% is good advice, see "The wealthy barber".

  15. Financial security has nothing to do with how much money one has saved or other accumulated assets. Financial security is an inside job. There are people with tens of millions who are very insecure financially and people with a lot less who are secure in knowing the true Source of wealth.

    That said, saving is a good idea, especially saving for opportunities.

  16. Saving is always something that seems like it will be easier to do when you're making more money. Trust me...Randy is right. Start now. Build good investment habits now, and they will serve you well for your life.

  17. It's really nice to see some of the New Age gurus come around to this type of sound advice. (Not that Randy is a New Age guru, but he certainly gets lumped into that group in some circles.)

    For too long, people were taking the "wealth" consciousness thing a little too far. They convinced people that in order to attract wealth, they needed to eliminate thoughts about not being able to afford what they wanted. This was great advice for the credit card companies.

  18. Right- ok, I got that; I save FOR other investments, but to me, that's still spending.. just spending to create more.

    I bought 2 rental properties a few years ago; one is a total mess, but the other gives me a slight touch of income, but of course, the mortgage is paid for by the renters.

    I invest in my internet businesses and books also, but I don't see that as SAVING...

    I know that some people save 10%, and NEVER touch it... I don't get that.

  19. This advise is nuts. Inflation is much higher than any savings account, your "dollars" are being devalued right now with the current administration "printing" dollars t cover the federal deficit. The value of the dollar has already dropped 40% in the last 7 years, which means, if you saved you are a loser. Invest in hard assets during inflationary times and sell before the bubble bursts, thats a strategy that works.

  20. Saving frees you up from living paycheck to paycheck. Finally after 49 years, I learned that lesson.

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  • 27 comments on “How You Manage Money, Part 2”

    1. -RG,

      We "people in the USA" are getting a very hard lesson on saving. We are a country of spenders. I heard that 70% of GDP in consuming. We are not learning the value of saving and the "evils" of instant gratification.

      -djm

    2. I think I just don't get WHY I save, or WHAT FOR.

      You mentioned to save for "long-term wealth and financial security".. when inflation is at 5%, and savings is at 2%, all I see is LOSING.

      I honestly just don't "get it". When I read Kiyosaki, he mentions that "savers are losers".

      Moreover, so you accumulate a bunch of money- then what? Do you then buy some investments? Is that the idea? Your home, investment properties, a business? What do you save FOR?

      I recently read that if you "save for a rainy day", you are assuring rainy days.

      RG- how much do you SAVE? Seriously, I just need to be educated on this.

    3. I learnt about this philosophy many years ago through my involvement in network marketing. It was and is very satisfying watching my savings balance grow. Initially I just looked for a bank account that paid more interest. As the amount grew grew larger, I was able to place it into other investment vehicles. Along the way I am learning about economics and investing, it's a wonderful ride! I have a lot more to learn but I have learnt so much already. It really does make me feel good about myself and I am encouraged to save even more to make my next investment goal a reality more quickly.

    4. Dear Randy ,

      I do the the same as you mentioned in your today post, while I took apart in Palinure 1st leadership seminar in Dubai 2008.

      and really thanks for wonderful subject you mentioned in your site.

      Cheers

      Mojgan

    5. That right Randy....i learn to start my saving for my future and now I added 10% more for charity. I believe when we donate our income to other who need it will make oyr heart peaceful..I believe when we give other....it will come back to us more than that.

    6. Japanese are very good at this, but recently more young people are going for instant gratification and expending much more via credit card payments. Now there is a law where lending companies must check the amount of total earnings/income and are allowed to only extend a credit maximum in which that individual can pay up for whatever loan on credit. 10% is always a good start as the "Richest Man in Babylon." I like Ecker's saving another 10% for something to spend on pure pleasure! I have to admit that I still need to practice this saving of 20% better, so I don't need to worry.

    7. I don't get regular pay checks, I never know how much income I will earn each month (such is the nature of my work), so some months I manage to save and some when I don't earn much I don't. Over on this side of the pond the recession has hit people hard and they are just not spending.

    8. Randy, I got an opportunity to join a network marketing program. I was a bit apprehensive, but based on a post you wrote earlier, I realized it was my residual lack program in my subconscious holding me back, from taking advantage of it. So I ignored it, and went ahead.
      Now after doing a Bob Proctor exercise yesterday, where I described my life and finances as it is now, and how I want it to be, and tore up the sheet representing my current situation....I found another network marketing system...and I applied for it also. I am getting the interview soon. Thing is, I was a bit apprehensive about this second opportunity, because I felt you had to focus your attention on one just to make it work, and if you had multiple interests, you might be distracted.....but I seem to hear your voice saying...'why not have more?'
      Is it possible, to run more than one network marketing system effectively or is this lack programming talking?
      And about your post...my bank automatically deducts a fixed amount every month and invests it for me, so that takes care of savings. 🙂

    9. Was it Einstein who said the 8th Wonder of the World was "Compound Interest". I did a straw poll with friends recently and hardly any of them knew what Compound Interest was!

      Just cultivate the habit of paying a regular amount into an interest bearing account and, notwithstanding the current low interest rates, you will be on the road to being wealthy.

    10. Your home, as an example, isn't an "investment". It's a liability. IF You rent it out, then it's an investment.

      To save money "to a bankaccount" isn't the "ultimate investment".

      Go check out stocks with dividends, then You can get a "direct cashflow" (dividends) wich You can re-invest and a long term capital gain.

    11. I agree completely.. I focus on being debt free and maintaining a low overhead, also. This way I can manage my finances, be able to enjoy a few luxuries, but also save money as well. No need in paying CC card interest rates, when I could have the money in an interest bearing acct. Even though money market or savings rates aren't that great, it's better to GAIN interest than lose it.

      Thanks Randy.

    12. Hey Randy-
      If anyone has kids, I learned a fantastic parenting skill around money management when my daughter was born. ( I learned a lot for myself in the process of teaching her as well )

      From the time she was 5 we gave her an allowance simply so she could learn about money. It was never attached to chores or behavior. Those where just expected as members of the family living together and we wanted to avoid any extra dramatic meanings around money's purpose.

      From her allowance she was required to save at least 10%, put aside 10% for charity or tithe, and the rest was hers to do what she wanted. If she saw something she wanted she could decide for herself if she wanted to spend her money on it.

      She learned that she had the power to choose if she wanted to "save up" for something special or keep buying smaller items. It also meant she wasn't always asking us to buy her things.

      At 5yrs old, she bought her very first Barbie all on her own after going to the store, figuring out the total w/ tax and how long it would take to get the rest saved up. She then began negotiations for ways to make more money so she could get to her goal faster:)!

      She also gave money for years to a cause she cared about and began her savings acct.

      Now that she is a teen and has a job, she has that same mindset instilled. She also is very aware that she loves earning money and can be generous and decerning at the same time.

      I wish someone had taught me ANY one of these skills long before my 30's. Imagine how much different things could be if kids where taught some kind of money management or checkbook balancing skills in Jr. High or sooner.

      Hope this was helpful to someone.
      Jeanne
      PS. BTW- The best book that helped me learn and instill new money management habits was definately, The Richest Man In Babylon by. In fact I think I will read it again.

    13. A good alternative to long term investment aside from bank savings, stocks, housing is Pre-developed Land.
      Land is zero terminal failure. It cannot depreciate. The answer to inflation is Landbanking.

    14. Landbanking, yeah! I have been more grasshopper than ant in my life, so now that the fall of life is approaching we have to carry on working when we can. No regrets, it has been a great life with more to come. (I am 66)

      Financially, the only smart thing I have done is to buy land when we could. If we absolutely had to we could sell half our acreage, solve all financial problems, and still have
      our own 5 acres left.

      I have always had more faith in the potato standard than in the gold standard.

      But if I could do things over, yes, saving 10% is good advice, see "The wealthy barber".

    15. Financial security has nothing to do with how much money one has saved or other accumulated assets. Financial security is an inside job. There are people with tens of millions who are very insecure financially and people with a lot less who are secure in knowing the true Source of wealth.

      That said, saving is a good idea, especially saving for opportunities.

    16. Saving is always something that seems like it will be easier to do when you're making more money. Trust me...Randy is right. Start now. Build good investment habits now, and they will serve you well for your life.

    17. It's really nice to see some of the New Age gurus come around to this type of sound advice. (Not that Randy is a New Age guru, but he certainly gets lumped into that group in some circles.)

      For too long, people were taking the "wealth" consciousness thing a little too far. They convinced people that in order to attract wealth, they needed to eliminate thoughts about not being able to afford what they wanted. This was great advice for the credit card companies.

    18. Right- ok, I got that; I save FOR other investments, but to me, that's still spending.. just spending to create more.

      I bought 2 rental properties a few years ago; one is a total mess, but the other gives me a slight touch of income, but of course, the mortgage is paid for by the renters.

      I invest in my internet businesses and books also, but I don't see that as SAVING...

      I know that some people save 10%, and NEVER touch it... I don't get that.

    19. This advise is nuts. Inflation is much higher than any savings account, your "dollars" are being devalued right now with the current administration "printing" dollars t cover the federal deficit. The value of the dollar has already dropped 40% in the last 7 years, which means, if you saved you are a loser. Invest in hard assets during inflationary times and sell before the bubble bursts, thats a strategy that works.

    20. Saving frees you up from living paycheck to paycheck. Finally after 49 years, I learned that lesson.

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