If someone offered you an extraordinary business opportunity, could you come up with $5,000 to do it? Do you always carry a few hundred dollars (or euros, pounds or whatever) of folding money around with you in case of emergency? If you needed $1,000 tonight for a hospital bill, could you handle it, or would you have to do an Easter egg hunt for it?
If you can’t answer all of these questions in the positive, then it’s time to work on your money management skills. Because by this point in your life, you should have the bare necessity stuff out of the way, and have extra money available for emergencies, unforeseen circumstances, and opportunities to enrich your life.
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.
You must save no matter what level of income you are at. There are part-time maids who still set aside enough savings to send their children to college. And there are guys who pull down $90,000 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.
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 to be clear, 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.
You up for that?