First things first, this post will not make you a millionaire overnight, nor will it let in on secrets on how to become a professional stock market trader. It consists of my personal reflections and experience within financial things and some tips on the way on how to actually achieve a realistic savings goal.
For those of you reading this blog for years, you know my life hasn’t always been an easy stroll and neither has my economical situation always been on top. For once the cliché about getting wiser as you grow older seems to be true, however. I count in all my misfortunes – as well as fortunes – of the past into my vast experience which makes one heck of a great mind in regards to being rational and not panicking when things don’t go the way I want them to. The financial part of my life is of course only one of the areas of life affected, but it is the one this post will focus on.
There are numerous articles about what you should be doing in your 20s, 30s, and so forth, and being a thirty-something I can’t relate to most of them. An article in Forbes lists 5 things you should have achieved by 30 and I can’t say I’ve achieved more than building a heck of a lot of human capital and getting a credit card. Another article found in CNBC tells us that 1 in 4 millennials have $100 000 or more in savings. As I’m apparently a millennial for a few more years, I guess I still have some time to get there however and this is exactly why I feel a need to write this post. It all comes down to planning, longsightedness, and being consequent. Most importantly though: Never regret the mistakes and misfortunes of the past. Let them guide you to a better future instead!
I am currently saving to buy a house in the US for when I and my fiancee make the move across the Atlantic, which I predict is within three years from now. Buying a house in the US usually requires a minimum of 10% downpayment and despite housing in America being cheaper than here in Europe, 10% out of $500 000 still requires that $50 000 straight up savings, unless you happen to win on the lottery or inherit someone. Not putting too much faith in lotteries and preferring my relatives to be alive, saving up to the sum is the way to go.
Both me and Niclas have good, steady incomes and that is a blessing. We are doing our best to keep costs down, manage our living expenses meticulously, and have looked over all possible opportunity costs. If you don’t know what an opportunity cost is, it’s quitting smoking, cutting down on meat or lunch savings for example. A great opportunity cost calculator and tips on other opportunity costs can be found on Pigly, a site that has a lot of financial tips to offer and a wide range of tools from budgeting, home loans, mortgages, savings, retirement planning and so on (and this is where I’ve spent hours reading and getting inspired).
If you can’t manage to save anything from your salary, you might need to do some research on where the money goes. Literally. One item that is loved by many for good reasons is also the source of many headaches: Our credit cards at first seem to give us financial freedom, but after a while, it’s easy to overspend and you end up with huge credit card bills. My advice is to, for one month, skip your credit card and withdraw your spending budget in cash which you pay all your transactions with. This allows you to control every single purchase and by handling real bills and coins you see what goes where while realizing there isn’t an endless amount of money to be spent. Based on that month you create a realistic budget on what needs to be spent where. Everything that isn’t essential or critical should go to your savings account.
There are many reasons for having a savings account. One of them is that life comes with unexpected surprises and you never know when you need that surplus money to fix your broken dishwasher or medical bill. The second is that you probably have a goal for your savings. In my case, it’s a house, but it might be anything from a dream vacation to a new car or a refurb of your home’s interiors.
Nowadays saving is actually quite easy for me. It is almost automatic as I know where each and every penny goes every month and the surplus is put into index funds, savings accounts, and paying back debt. Yes, I both save and pay off debts at the same time, not the latter first. The reason is my funds and accounts have a great interest rate and thus I will hopefully be able to pay my debts off faster that way.
It goes unsaid that the more you make, the bigger your savings will be. Don’t let that scare you off no matter how much your salary is though. Even putting away $50 each month is a great start and amounts to $600+ annually depending on what you save it in. Something that may have given you anxiety in the past actually can become a fun hobby and the beauty of it is that you don’t need huge amounts of money to get started.
The current situation in the world doesn’t seem all too optimistic considering all things happening. I will refrain from commenting on these, but what is imminent and obvious is that many people are affected financially from furloughs, people losing their jobs, and the entire market economy going through hardships. In these times it feels better than ever to be prepared with a financial buffer and hopefully, you feel inspired to look into exactly how you can get started to reach your savings goals.