If you want to save more money, where do you start? What’s’ the first step? If you’re surprised by the answer, you’re not alone. Most people are. Brought to you by FinancialFreedomTool.com. Plenty of money…for life!
Today’s show is a continuation of this topic. If you want to save more money, where do you start? What is the first step? We discuss this on our show today. Most people are surprised by the answer…
Is making more the key to saving more money?
Most people think so. “If I just had an extra $500 a month, I could definitely save more.” But then they get a raise of $500 and soon spend $600 a month. More money made them worse off.
We tend to think more money is a magical elixir. It’s not – at least in the short run. We’ll talk about the long term in a little bit.
So if it’s not making more, what is the first step to save more money?
Plug the financial leaks.
Think of the plumbing system in your home. A leaky faucet will cost you money every month. Left untreated, a small leak may grow to a constant drip. Water keeps working on the parts. You need to fix it before it turns into a steady flow.
Your financials work much the same way. Rather than water going down the drain, money is wasted. You’re spending too much on something. When you get in a hole financially, you get charged late fees and interest. A small leak grows and grows.
Before you bring in more money, you want your financial system to be as efficient as possible. Then new money can be used for better purposes than just plugging leaks. Stated differently, you manage your money proactively, instead of reactively.
In addition, it’s easier to plug the leaks than it is to make more money. You have more control over expenses than you have over income. Other people have a say in you getting a raise or a bonus. You only need to consult with yourself (and if applicable, your partner in life) to plug a leak. So you’re able to put more money in your pocket immediately.
Now, we hasten to add – this is a short-term strategy, assuming you properly maintain your finances once you fix the leaks. You can only cut costs so much before they start taking a bite out of your happiness. Once you’ve plugged the leaks, you have to start thinking more long-term.
This Podcast Episode is Sponsored by: FinancialFreedomTool.com
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The long game: Save more money by making more money
Plugging leaks is a short-term strategy. Once you’re done, focus on the long game: make more money AND invest it.
Consider an example with two scenarios. In Scenario 1, you don’t plug the leaks. You spend $500 more than you bring in each month. That’s a leak (or more likely, a number of leaks). But you don’t worry about it. You don’t fix it. Then, you get a $500 a month raise after taxes. Your net cash flow is now $0.
In Scenario 2, you plug the leaks. You start in the hole $500 a month. But you fix it. You cut back. You find $500 of leaks. Your net cash flow is $0. Then, you get a pay raise of $500 a month after taxes. Now, your net cash flow is $500 a month. In total, you’ve experienced a $1,000 swing in your financial situation. When you don’t have to use new money to catch up, you can use it to get ahead. That leads to BIGG success!
Get the most from your money before you worry about getting more money.
Tool helps you find financial leaks
Our Financial Freedom Tool will help you get the most from your money by finding the leaks in your finances. Learn more
Here’s to your BIGG success!
George “The Professor” & Mary-Lynn
Co-Founders, BIGG Success
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