Why do we work?
We work to earn a pay check which we spend on two things: Survival (the things we absolutely need), and Thrival (the rest). Somewhere between the two we often forget to set aside a portion of our earnings for the most important investment there is: ourselves. And the magic number here is 15%. If you were to invest 15% of your salary each month and get a moderate to average return, in just 15 years you’d be able to replace 100% of your income. Your money would be working for you instead of you for it!
Let’s be honest – forming good habits takes time, and 15% can seem like a very big ask initially. That’s why I always tell people to start with just 1%. Increase your income by 1% or cut down your spend by 1% each month and in a year you’ll find it a lot easier to crank that up a few notches. Better yet, don’t give yourself the opportunity to second guess it. Set up a recurring investment so it automatically goes off of your account each month!
Here are 3 easy steps to help you survive and thrive post pay day:
1. Put your spending into two boxes: Survival and Thrival
Print out your bank statement and highlight them in different colours.
Survival is the essential stuff; stuff like food, water, electricity, shelter, health and safety, that if you don’t spend money on, bad things happen.
Everything else goes into Thrival spend. This is your personal spending. You have a choice to spend your money here, not necessarily an easy one, but you do have one. Rank this spend from most to least important. Only you can do this but it’s always good to share your priorities with others and let them argue them with you to make sure you are making the right choices.
Thrival for me is about increasing my self-worth and wealth, so I prioritise this spend around whether it really is helping increase these two things… Investing is Thrival spend and in my opinion it should be the largest part, it’s how we are going to afford the big things: education, houses, holidays and a safe, successful retirement. Investing allows us to afford our Thrival without dropping further into debt and digging ourselves a bigger hole.
2. Make room for investing in your self-worth and wealth
Some people don’t get past Survival spending but that doesn’t mean they can’t save. Those that have Thrival spend need to be ruthless with the stuff at the bottom of their priority list, making sure you’re swapping low priority Thrival spend with stuff at the top of your list. If you’re like me that means upping your recurring investment spend by a percentage every month.
3. Spend less or earn more
To make these savings and investments happen, there are your two ways out. Attacking the problem 1% at a time/month has delivered the best results for me. Some months it’s going to be easy, like when you get a raise or a bonus, so bank it for your Thrival... Other months it’s going to be hard. You are going to need to be smarter around where you shop, bank, eat etc. This simple guide gives you lots of ideas of where and how… in fact not all 100 will work for you but I guarantee you’ll find at least 10 unlocks to reaching your goal of saving and investing 15% of what you earn every month.
Let’s do this!
Listen to Charles Savage share post pay day saving advice with DJ Fresh on the 5fm Fresh@5 morning show: Fresh Money with Charles Savage 1 September 2016