S Is For Saving

If you learn one thing today that you can put into action right now, the thing that will change your life the fastest is that saving comes before spending.

Remember this: you save before you spend

If you spend before you save, you will rarely save enough to change your life. You will always be chasing money and always be working for money.

If you save before you spend, you can save as much as you choose. You can transform savings into investments, and then your money can start working for you. One day, you will be able to stop working for money because your money can do all the work you need.

You can separate your savings with envelopes or direct debits into separate accounts, but the key is to do it first.

Why do we save?

Most people save badly because they don’t really know why they’re saving. They’re saving for a holiday (not saving). They’re saving for the deposit on a house they really like but can’t afford (maybe saving). They’re saving for their retirement (saving, but so far away, they think, that it’s hard to be motivated).

The first reason to save is for emergencies. If you have an emergency in your life, and don’t have any savings, you may have to borrow. Having a savings fund for emergencies is one of the most important factors in using money to be Happy Ever After. The money itself doesn’t make you happy, but having money there in case of an emergency, not having to borrow and repay for years, is a key part of how many can make you happier.

We can also save for freedom. If we were told that savings led to freedom, we would all save more and then invest those savings. The freedom to not do what you don’t want to do feels so much better than buying the thing that cost you that freedom – whatever that thing is.

The Freedom Formula tells us we need 25X our spending to be free – but that doesn’t mean we need to save that much. If we saved half our income, spending the other half, it would take us 25 years to save 25X. If we saved just one third of our income, it would take 50 years to save 25X. Luckily, we can learn how to invest well (and safely) so that the money we have saved starts to make money all on its own, and compound that amount over time, to help us reach our freedom faster, and be Happy Ever After sooner.

And that’s why we save – to be Happy Ever After.

Tip: One For Me Now, One For Me Later

If you’re not saving much of your income today, it’s hard to cut back on so many of the things you enjoy immediately to start saving more. It’s not impossible, but it is hard.

We think one of the cleverest ways we know of doing this is to save half of any increase we get. If we get a pay-rise, save half of that. If we start a side-gig, save half of that. If we change jobs and get paid more, save half of that. Any time we get some more income, we save half immediately, leaving only half to spend. (Remember, saving comes spending, even with a pay-rise).

For every two dollars extra you get, save one and add one to your budget. Over time, even if you start with no savings at all, this will get you saving, and give you the ability to invest and be free.