Donât waste your time trying to win the lottery, or looking for get-rich-quick schemes because the best way to become, and to retire rich, is to plan and work for it. In fact, that is the safest, and the most practical way to get millions in your bank account. Unfortunately, many do not know how to plan their finances properly. So they end up working their whole lives, and eventually retire with very little money to show for during their golden years. But the good news isâ¦ we will change all that today.
Pay yourself first.
The rule is simple. When you receive your salary, immediately take away a portion of it as your savings, then disburse whatâs left to pay for your bills and daily expenses. Doing this takes away the emotional stress of scrimping on your spending just to save money. It is also the simplest way to budget. Begin by paying yourself ten percent of your income, then slowly work your way up to 30%. With enough discipline and perseverance, youâll see that it isnât that hard to live comfortably with just 1/3 of your salary.
Build your emergency fund.
Multiply your monthly salary by six and youâll get the minimum required emergency fund that you should have.
Having an exact amount as your target savings will motivate you to keep that habit of paying yourself first. Donât stop until you safely have that amount in a simple savings account.
Remember that this is an emergency fund, which means you can only use it for important medical expenses, necessary home repairs, or similar circumstances. And when you use it, donât forget to replenish it as soon as you recover financially.
Manage your debts
If you have existing credit card debts and personal loans, one practical way to manage them is to keep on saving and building that emergency fund while paying just a little over the minimum every month on the bills.
Doing this will keep those collection agencies off your back as you create a buffer of cash so you wonât need to borrow more money when a financial emergency occurs. More importantly, cut up those credit cards and make sure you donât incur any more debts during this time.
Now comes the challenging part: find ways to lower your current expenses, and look for extra income, then use all the surplus cash youâll create to pay for the rest of your debts.
Of course, once you reach your emergency fund requirement (which is again, 6 months worth of your income), then itâs time to funnel ALL that money youâre paying yourself from Step 1 into those debts.
It will take time, but I guarantee, youâll eventually get out of debt using this method.
Invest in yourself.
Give yourself a pat on the back when you reach this step because youâre already done with the hard part of financial planning and the rest will be a breeze.
At this point, your priority is to protect your best source of incomeâ yourself.
Get a health insurance, if you donât have one yet, but more importantly, live a healthy lifestyle and maintain a positive outlook on life.
If youâre the breadwinner, get term life insurance. This is the cheapest way to make sure your family wonât suffer financially in case you kick the bucket sooner than you expect. How much coverage should you get? That totally depends on your familyâs situation but to give you a starting figure, multiply your monthly salary by 60. Your death benefit will give your dependents five years to get their act together.
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