Nothing is more important for your financial stability than saving Money on a routine basis. This is more recently known as paying-yourself-first, anytime that you receive money. View your savings as the most important bill for you to pay first, before any of your other expenses. (There is a consulting company that assists small businesses in doing this, and it transforms formerly break-even companies into profitable companies by forcing them to make routine payments to a “Profit Account”). A failure to routinely save money is the inciting force for:

• Racking up unaffordable debts
• A lack of maintenance or repairs on things you own
• Being unable to provide opportunities for your children
• A lack of adequate medical treatment
• Dwindling hope for a comfortable retirement
• Preventing progress on important goals to you that require money

Although budgeting arithmetic is simple, creating a budget is the process of making very difficult choices and setting priorities. These can be tough mental and emotional decisions for a family to discuss. Expectations, dreams, general lifestyle, vacations, and more – all have a role in making budgeting tradeoffs. For some people, frugality is an easy way of life but for spendthrifts, they get angry if anyone mentions reining in their out-of-control spending.

The simplest savings plan is to allocate a percentage of your income to savings or investments. For example, start out with some number, like a 7% savings rate (it doesn’t matter if it is before or after taxes), and then gradually ratchet that percentage up to a minimum of 20% of your after-tax income. I know several financially-ambitious people whose saving’s ratio is over 35% of their after-tax income. Your savings percentage could be made up of components such as: vehicle replacement, general home maintenance, college fund for kids, and retirement funds. This way, the money is assigned a purpose to support your particular goals and will be available when you need it.

Having extra money is the first buffer that allows you to move away from the very expensive “unbanked” lifestyle (expensive check cashing fees, money order fees, payday loan interest, high-interest car loans, etc.). Savings allows you to move toward bank and brokerage accounts that offer bonuses and perks to keep your account. For example, when I first opened a retirement account, I received a flimsy 1-page brochure of general news with my statement. Later that day, I happened to visit my father, who had far more money with this same brokerage firm. However, with his monthly statement was a giant package of pre-IPO stocks and special bond offerings! It is by growing your savings that allows you to transition from stressing about a potential financial emergency to having capital available for investment or business opportunities.

For their own self-interest:

• Every company wants you to spend money with them.
• Every politician wants you to spend money to aid the economy.
• Every bank wants you to borrow money to pay them interest (and as a side effect, allows you to spend even more money).

What is the opposite of spending – that would be in your self-interest instead? Accumulating Capital. And this can only be started, maintained, and grown by adding money to your bankroll every time you receive money from any source. Saving and accumulating capital should be your most important goal and habit. Then, you have a stable financial platform to invest and pursue opportunities unavailable to those without this habit. Continuing to do this will provide increasing financial freedom.

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