What if I told you that by following five simple steps you could assure that
you would never struggle financially ever again unfortunately as a twenty
seventeen seventy eight percent of all American workers say they live paycheck
to paycheck and it's not just low-wage workers who have this problem either
nearly one out of every ten workers making over $100,000 a year say that
they also live paycheck to paycheck and fifty-nine percent of them are in debt
living paycheck to paycheck is like being stuck on a never-ending staircase
no matter how hard you try you can never get ahead every dollar you make goes
into paying bills leaving you with nothing left to show for all of your
hard work compound this financial restriction with unexpected expenses and
it's no wonder that 55% of all Americans are in credit-card debt with 10% having
more than a $5,000 balance outstanding so if you continue in this financial
struggle for years how do you ever work towards your long-term financial goals
like buying a house or saving for college let alone for luxuries like a
nice vacation the good news is that the following five steps will help you break
free from any financial turmoil you may be facing and never live paycheck to
paycheck again step number one track your spending trying to save money
without tracking your spending is like trying to hit a target with your eyes
closed it just won't happen therefore the first step to taking control of your
finances is to figure out exactly where all your money is going believe it or
not most people make enough to cover their core expenses but the reason they
struggle financially is because of their discretionary spending that they may not
be even aware that they are doing as such your first goal is to track down
those hidden budget Buster's and eliminate them so for the next month
truck every single penny you spend from your monthly rent payment to that dollar
for a cup of coffee jot down your expenses in a notebook or use personal
finance software like mint to keep track of all of your spending make sure to
consider your automatic payments and hidden costs to your monthly
subscription and Netflix or bank transaction fees are sneaky culprits
that will drain your savings potential every single month for those who want to
manage their money old-school-style write down your expenses in a notebook
instead simply seeing all of your expenses written down in black and white
can be a revelation for instance you might realize you've
been blowing nearly $30 a month on ATM fees or $50 a month grabbing a snack at
the convenience store on your way home from work seeing how these nickel and
dime expenses are costing you could be enough to shock you into changing your
habits freeing up passion your budget at the end of each month step number 2 make
a budget once you know where all your money is going every month you can then
use that information to make a budget when it comes to the format of your
budget some people will prefer to write their budget down on paper while others
will lean towards tracking using software like Excel either way works but
the main thing is that you update your budget and stick to it
now I told you that these were five simple steps to ensuring your financial
success so let me share with you two of my favourite budgeting methods the first
is a twenty thirty fifty method this budget method works in the following way
every month you divide your income with fifty percent being designated towards
living expenses like rent utilities and groceries the next 30 percent goes
towards entertainment costs like going out deed or seeing a movie
the final twenty percent is meant to go right into your savings account
unfortunately not everyone wants to break down their expenses to this level
which is why I want to share with you what I find to be the easiest budgeting
method ever invented - 8020 method if you're unfamiliar with
this method here's how it works 80% of your income goes towards your
living expenses and the other 20% goes towards your savings every month it's
that simple just make sure to include annual
expenses like property tax payments and gym memberships into your budget in the
appropriate months so they see these larger expenses don't take your savings
efforts in the month they come due step number three cut expenses now that
you've set up a budget it's time to optimize your potential to save sure you
are now intending on saving 20 percent of your income every month but what if
you could save more to make room in your budget for more savings you need to look
for other things you can cut there are two main types of expenses in your
budget fixed and flexible fixed expenses are costs that are the same every single
month such as your rent or car payment flexible expenses are those that vary
from month to month such as gas and groceries to save as much as possible
you need to look at both these types of expenses
flexible expenses are usually easier to cut since they don't require major
lifestyle changes however you can often find greater savings by cutting back on
fixed expenses since these are some of the biggest items in your budget for
instance finding an apartment that costs $300 less a month will help in the same
Department much more than cutting out a few coffees a month once you've found
some big savings opportunities in your day-to-day life to increase your savings
you should pair this excellent work with the shift in your savings mindset from
this point forward whenever you consider buying something ask yourself do I
really need it when I was establishing my own money saving mindset I would use
a stranger test for every purchase I was considering if you're unfamiliar with
this money-saving trick let me explain how it works every time you think about
buying something picture of strangers standing in front of you in one hand
they have the item you want to buy in the other hand they have its monetary
value in cash which would you rather have in most cases the cash is probably
more appealing when taking this approach on a regular basis you'll start to see
yourself continuously picking the money over the item which solidifies your
position and not splurging and instead keeping that money in hand step number 4
boost your income for most people cutting expenses is the easiest way to
boost savings however if you're already living on a shoestring budget there's
probably not much you can cut in this case the best way to save more money is
to make more money there are two main ways to do this earn more at your job or
find ways to bring in income on the side let's start by looking at a few ways you
can increase the income you earn through your job
our first glance it may not be obvious how you can increase the income you get
from your job after all your boss that's your pay rate not you
however if you look carefully you'll find that there are actually several
ways to give your paychecks a little boost for instance you can offer to work
more overtime if you were all allows for it moreover you can demonstrate to your
boss that good work you are doing and pitch him or her on the fact that you
deserve a raise in the same vein you can look into other opportunities within and
outside your company for higher paying roles now maybe you don't think any of
these methods will help increase your income then we have to move on to
outside sources of income to boost your earnings one of the ways to supplement
your nine-to-five income is by picking up a second job while holding
down two jobs at once is demanding if you can manage it even for a short time
it can give you the extra cost you need to pay down some debt or get your
emergency fund started another great option is to start your own side
business you already have to listen to your boss for eight hours a day so why
not be your own boss while also supplementing your income this can come
in the form of freelance work a YouTube channel or driving for uber or lyft
however if you can fathom working even one extra hour a week then renting out a
room in your house is another way to increase your income whether you do this
by taking on a long-term tenant or renting out a room on Airbnb leveraging
your property to earn you some extra cash is a great way to kickstart your
savings efforts step number five put your money to work once you've found
ways to set aside more money in your budget for savings you need to start
putting that money to work for you if you simply leave it sitting in your
savings account it won't earn much interest the average savings account
yields just 0.09 percent interest annually which means that even if you
have $50,000 in savings you'll earn a measly forty-five dollars an interest so
where should you put your money instead common investment vehicles include
equities and real estate which have historical average returns of eight
point four and six percent respectively so with that same $50,000 we just talked
about you can instead be earning anywhere from 3,000 to $4,200 instead
but maybe picking stocks to invest in or being a landlord doesn't appeal to you
don't worry there are other investment vehicles you can use to grow your wealth
some of the most commonly used investment vehicles include Roth IRAs
and 401ks and if you're unfamiliar with them let me briefly explain how they
work with a Roth IRA your contributions are taxed when they're made so you can
withdraw the contributions and earnings tax-free once you're age fifty nine and
a half this is important because whatever amount this account accrues to
over time will be the exact amount you'll have access to when you withdraw
it and similar to a traditional IRA a Roth IRA has an annual contribution
limit of six thousand dollars a year or seven thousand dollars for people age 50
or older a 401 K on the other hand is a retirement plan that is offered by
employers which allows employees to realize tax advantages when used
you see normally when you were in money as an employee you have income taxes
withheld on the money you earn a 401k plan allows you to avoid paying income
taxes in the current year on the amount of money that you put into the plan the
amount you put in is called a salary deferral contribution as you've chosen
to defer some of the celery urine today put it in the plan and save it so you
can spend it in your retirement years then upon retiring you will draw out the
amount of money you need to live from the plan which will hopefully be at a
lower tax rate than you would have incurred when working allowing you to
save tax overall once you have one or both of these funds set up you then need
to ask yourself how involved you want to be in the investing process if you want
your involvement to start and end with a deposit into your account then using a
Robo advisor to manage your investment portfolio as a way to go alternatively
you can self manage your fun by choosing the specific funds you want to invest in
either way the main thing is that you start letting your money work for you
thanks for watching if you want to go from the life you have to the life you
deserve then hit the subscribe button now
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