1. Become Financially Independent
The measuring stick for being rich is different depending on who you talk to. However, the one thing that the notion of “being rich or wealthy” means to most people is having financial independence and savings to depend on. Calling your own shots, financially speaking, means having the freedom to make choices in your life separate from earning a pay cheque.
This may mean being able to take a vacation whenever you want to, leaving work and going back to school to switch careers, starting your own business or investing in someone else’s start-up, helping family members, taking on a lesser paying job that is more personally satisfying than financially beneficial, or a big one these days – retiring when you want to rather than working because you have to.
2. Save 50% on Everything You Buy + 24% on Groceries
If you normally charge all of your purchases on your credit card, and then you don’t pay off your credit cards in full every month, because of added interest charges you are probably paying at least 50% more for everything you buy. If you are relying on your credit cards to afford your lifestyle, break your expensive credit habit by saving up for your purchases ahead of time.
With savings, you can buy things when they are on sale and take the time to make better spending choices. People with savings can also stockpile groceries when they are on sale (items that are non perishable or which can be frozen). One author suggests people who do this can possibly skip one grocery shop a month and save 24% a year on their grocery bill.
3. Buy a Home
The bank won’t lend you money to buy a house unless you have a down payment, and you are not allowed to borrow a down payment. You must have this money saved up or have someone give it to you—and not lend it to you. Your down payment needs to be at least 5% of the purchase price of the house, and then the bank will consider lending you the other 95%. There are all sorts of other costs and fees that you need to pay when you buy a home, so you will need an additional 5% just for those costs. Savings is what will open the door to owing a home.
4. Buy a Car
When you want or need to buy a new car, you will need to have a down payment in order to get a car loan at a reasonable interest rate. You could of course “borrow” the money from your credit card, but at 20+%, how is that getting you ahead? Zero percent financing is reserved for great customers, so a car loan is bound to cost you something—and it could be a lot. The best thing you can do is save up as large a down payment as you can afford, and then consider your options. Maybe buying a quality used car rather than a new one will be what it takes to get you the vehicle you want.
5. Get Out of Debt
If you ever want to get out of debt, you have to have some money saved. Sounds ironic, doesn’t it? However, the credit cards are never going to get paid off if you have to keep using them for every “emergency” that comes along. Even if you are an awesome planner, stats show that half of us experience at least one totally unexpected expense each year (and half of those will be unexpected car trouble).
SAVING IS GOOD, BUT YOU ONLY SAVE WHEN YOU HAVE MONEY, RIGHT
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