By Bigg Success Staff
Bigg On Money
It’s easier than you might think to accumulate a nest egg. However, it’s becomes more difficult every day. That’s because time is on your side, when it comes to money.
Let’s say you want at least $1 million when you retire at 65. We know … you want to retire earlier than that. We’re glad to hear it! But keep reading our example so you understand the point. It’s important!
At 25, all you need to do is invest $10 a day to reach that goal. If you wait ten years to start, you’ll have to set aside $22 a day. So our point is …
Here’s how to retire earlier – if you’re 25 and you want to retire at 55, just find $22 a day to invest. But no matter how old you are, get started right away!
In the above example, we assumed you could earn 8 percent on your investments. If you can earn more, you could retire earlier. But be careful – increased returns usually carry higher risks.
Before we get started on the steps, there’s one thing we want to talk about. It’s important that you have a well-defined goal. For example, our goal above was to accumulate $1 million.
|Want some help writing a well-defined goal?|
Our Bigg Goal-Setters Workbook is your answer!
At Bigg Success, we think about this way –
Your money makes money so you don’t have to.
Then you’re free to do what you want.
How much will that take for you? That’s your goal! Now, let’s talk about the six steps to get there.
#1 – Automatically pay yourself first.
Many people are confused by this concept. Of course, you pay yourself first, right? After all, your money is yours to do with as you please. However, they miss the point – at the end of the month, they have nothing left! Pay for your future just like you pay for every other bill.
Set up an automatic deduction from your paycheck or your bank account. People report that if they don’t see the money, they don’t miss it! This is the most critical step because it gets everything started. Don’t stop until you reach your goal.
#2 – Purchase with purpose.
We all make many spending choices every day. Do you really need that plasma TV now, or could you wait awhile? If you don’t have the cash, don’t spend it. Also, look at the annual effect of your daily decisions (e.g. coffee or lunch out every day).
Can you find a way to save an extra $10 every day? As we’ve already seen, that can turn into $1 million in 40 years. As you see your accounts grow, you’ll be inspired to keep going.
#3 – Own your own home.
We can make a good case for renting. Research shows that you’re better off “renting and investing” than owning your own home. However, most renters never get to the second half of that phrase.
That’s one of the reasons why the net worth of homeowners is so much greater than that of renters. Owning your own home forces you to save money. It’s very much related to the first step.
Don’t be “house-poor” – it’s not that good of an investment! Find a house that meets your needs. You can always trade up when you don’t have to worry about money anymore!
#4 – Pay off debt.
You’ve probably heard people say, “I want to buy a house because renting is just throwing money away.” Why are we so opposed to “throwing money away” to our landlord, but we think nothing of throwing it away to our banker or credit card company?
After all, the interest they charge is a rental fee on the money you’re using. There’s no difference! So pay off your debt so you stop paying interest.
Start with one obligation, like the one with the highest interest rate. Pay it off. Take the payment you’ve been making on that and add it to another one. Pay that one off. Eventually you’re debt-free! Don’t stop! Keep making those payments – to yourself! It will jump start your future! That’s another secret to reaching your goal early!
#5 – Invest wisely.
A lot of people don’t accept enough risk. If you invest too conservatively, it’s hard to reach your goal. There’s a basic financial principle – increased risk deserves increased rewards.
But here’s the secret – time takes away much of the risk. If you’re investing money that you don’t need for five years your risk is generally less than if you need it in one year.
Don’t put all your eggs in one basket. The easiest way to do this is to invest in a no-load mutual fund balanced for people in your age bracket. Don’t touch this money until you’ve reached your goal.
#6 – Prepare for the unexpected.
Here’s what you can expect – you will face some obstacles on the way to your financial freedom. Prepare for them. Make sure you’re insured properly, including disability insurance.
Stash away an emergency cash reserve. Most experts recommend that you have three to six months of living expenses in an account for unexpected events. If you have equity in your own home, you may be able to establish a home equity line-of-credit to cover these emergencies. Then you can invest the money you have kept in reserve.
You won’t get rich quick with these six steps. However, they will put you on the road to financial freedom. Enjoy the trip!