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Would you like to have superpowers? Yeah, me too. Having your finances in order will allow you to harness such powers. It feels great to be the master over your money rather than the other way around. I believe we all can and should be saving something.
If you have obstacles in the way, like debt, take the time to lay the groundwork…and then get ready to show off your superpowers!!!
It’s Never Too Late To Start
I don’t care who you are or where you’re at in life, it’s never too late to start saving. On the flip-side, it’s never too early either. There are basically three things you can do with your money:
Even if you have to focus on some of the other groundwork laid out in this article, you should be saving something. It’s a good habit to build.
The key to saving is to not touch that money. Put it away and forget it.
Of course, there are different ways to save money and those are either in investment or savings accounts. The former being where the magic of compound interest comes in. You’ll want to take advantage of that as soon as you can.
Investment accounts are for long-term financial goals. If you have an employer-sponsored 401k or something of the like, start contributing, at least up to the employer match. At some point, you can hopefully ratchet that up to higher percent.
Savings accounts are great for short-term financial goals. You won’t get a lot of interest-bearing growth here but you won’t get risk either and the money is easily accessible. I’m of the belief that everyone should have an emergency fund of somewhere between 3 – 6 months of expenses saved. Also, a savings account is where you can save for a future car or down payment on a house.
Lay The Groundwork
If you owe other people money, that diminishes the amount which can go towards a high savings rate. It also means someone else owns you.
“The rich rule over the poor and the borrower is slave to the lender.” – Proverbs 22:7
I found debt to be a shackle and so I focused hard on paying mine off. That simple fact allows me to now put 60%+ of my monthly income towards investing and saving.
The only debt I’d consider now is a mortgage. I currently rent but am saving a down payment for a house. Mortgage debt is fine if you are living within your means and can still afford a high savings rate. However, I’ve also heard of a great many people hunkering down and paying off their mortgage. I imagine living in a paid for house feels boss.
Anyway, if you have any other debt (car note, credit cards, student loans), I think it wise to pay them off quickly. Refinancing for a lower interest rate is certainly a lever to be pulled. However, the real attack will come by paying off big chunks as quick as possible.
And if you owe money to the IRS, focus on this first!!! The U.S. Government is kinda powerful.
The intensity is worth it! I still saved while I was paying off my debt but my main focus was plowing as much of my income towards my debt as possible. Three and a half years later, I own my entire paycheck.
Get To Possessing Your Superpowers
The groundwork is necessary but once you’ve got it laid, you get to be superhuman…
Superpower #1 – Give Like a Rockstar
Whatever your personal philosophy is on giving, I believe we all need to do it. I’ve found it’s better to give than to receive. So I say give like a rockstar!
Giving comes in many forms. How about donating some time to a worthy cause or a person who needs help? It doesn’t have to be a lot of time either to have compound effects. I guarantee if you spend one hour per week pouring into someone’s life, the fruit will come. Of course, if/once you FIRE (financial independence, retire early), you can get extravagantly generous with your time.
I’m a Christian and so I believe in tithing. I try not to be religious about it, but I’ve found that giving 10% off the top of my income helps keep me focused and disciplined. Additionally, I budget money for a random giving fund each month. If I come across a cause or a person that I believe I’m called to help, I utilize this fund. It makes me feel good.
How about stealthy giving?
How about giving compliments and positive feedback to people you meet?
Superpower #2 – Make Your Money Work For You
Now that you own your entire paycheck, you can put your money to work for you. I suggest investing in low-cost index funds, single stocks (if you have the time to research them), a business venture, and/or real estate. Investing is all about maximizing your rate of return and taking advantage of the glory of compound interest. Currently, I’m investing in low-cost index funds. But here are the areas I’m considering/working towards:
- The real estate market
- Single stocks. I haven’t done this yet but I am really intrigued so perhaps I’ll block off a small amount of time each week to dig deeper.
The higher the percentage you can put towards investments, the more your money begins to work for you. These investments are what will allow you to retire.
With a big chunk of your money going towards savings/investing, you get to tell the rest of it where to go. I personally find joy & satisfaction in budgeting. It becomes a game to drive my expenses down each month and see how much more I can save. Yep, good times for a redeemed money nerd. 😉
However, I know many people who set their savings goals and live off the rest without budgeting per se. That is fine too and I say pick what works for your personality but remember the ultimate goal is to drive that savings rate up!
Superpower #3 – Embrace a Growth Mindset
Now that I”m not in a constant state of stress over my finances, I have more capacity for growth mindednesses. Growth-minded means seeing a problem as something to be solved. It means if I discover something I’m not good at, I can become a student of that thing. It means giving myself grace. If you want to learn more about growth mindsets, I highly recommend reading, Growth Mindset by Carol Dweck.
BTW, I am a member of the Amazon Affiliate program. If you click on a product I link to and purchase it, I get paid a commission.
Prior to getting sober, I lived below the line in so many ways. I was in constant survival mode with my emotional, physical, spiritual, and financial state. Aah, I am glad to be on the other side of that!! Even after getting sober, it was still another 4 years before I was able to focus on cleaning up my finances. My mental freedom has come in layers:
- Fog lifting after putting down the drink and drug
- Self-awareness as I dug into why/how
- Replacing lies I told myself for years with some solid truth
- Becoming the owner of my entire paycheck
I see things differently now that my mental capacity is not spent on stress and worry. In turn, this allows me to possess a growth mindset.
Superpower #4 – Practice Mindful Spending
Typically our biggest expenses are housing and transportation. Find a way to drive these down and you’ll be golden.
I’ve chosen to live in a small apartment within a 1-mile radius of my job. My rent is less than 24% of my take-home pay. Keep in mind my take-home pay is after my pre-tax deductions are taken out for my retirement accounts.
Additionally, this choice is helping me keep my transportation costs low. I drive minimally during the work week so I don’t spend a lot on gas and I’m able to squeeze more life out of my 2008 Saturn.
What do you value in life? Relationships? Yep, me too. How do you foster those relationships? If it’s the time with your loved ones that you value, you don’t really have to spend a lot of money. There are a ton of free or low-cost things to do with your family and friends. For example, I just went on a free guided walking tour of downtown Cleveland with a friend.
I’ve found that I enjoy cooking for and/or with friends more than going out to eat. It’s healthier, it’s more economical, it’s more comfortable, and it’s conducive to playing board games after dinner.
When I was paying off debt intensely, I made some sacrifices. What I discovered in this so-called period of “deprivation” was that I was no less happy. As a matter of fact, I was FIRE’d up while working towards my goals. I loved seeing the balance on my student loans drop each month.
However, it is a little more fun to watch the balance on my savings increase.
I had the realization that my happiness did not stem from stuff or spending money. In turn, this allowed me to see clearly that my happiness is directly correlated to my relationships, experiences, spirituality and living on purpose.
With my new take on what I truly value in life and being above the line, I set out to make very intentional decisions with my life and finances. I developed the habit of mindful spending.
This is something Cait Flanders discovered in her year-long shopping ban. I am about halfway through her book, The Year of Less. I can relate to so much of what she writes about and I just love this line:
“During what was supposed to be a simpler year where I pursued less, everything I loved and relied on was taken from me, and I was forced to start from scratch and make a new life for myself.”
– Cait Flanders
It’s very easy to pacify ourselves with stuff. Take away the stuff and then you get to the insecurity. Get to the insecurity and replace it with truth, and then you can learn to find true happiness.
For years I could not imagine thinking about my finances with a growth mindset. Fortunately, a few people poured into my life and showed me a way out. I took action and became the boss of my money. That perspective shift has changed everything.
While I’m not yet financially independent or retired early, I’m finding ways to give and my most favorite is pouring into other’s lives. Watching the light bulbs turn on and seeing people gain victories is a superpower that I’d like to duplicate many times over.
So what’s holding you back? What superpowers do you practice?