How to save money for your investments - without the pain!

Learning how to save money well is a habit that millions of people find incredibly difficult.

It's absolutely terrifying how many people out there live from week to week, having very little idea of how much they are spending, and often completely broke by the time the next payday comes around. What's even scarier is how many people actually spend 10% more than they earn each year, getting deeper and deeper into debt, without realising (or at least acknowledging) that they are doing so and often without any idea, let alone a plan, to get out of that debt.

Understanding how to save money effectively is one of the key skills you need to become a successful investor.

We all need to learn how to save money.

You may even be the biggest miser out there, but you can probably learn how to save money better!

Can you believe that I know of a shop owner with over a million dollars in his vault, and yet he still keeps the mortgage on the building his shop is in? Some might call that smart, if he was using that mortgage to finance further investments to increase his wealth, but he doesn't! So that building is still needlessly costing him a lot of money every single year. This person never takes a holiday, and is afraid to spend anything in that vault in case something happens to the business.

The trouble is, life quality - and even business success - suffers because of it.

A smart way to save money would be to pay off the mortgage, reduce the security risk (and cost) of keeping so much money in a vault, and redraw on the loan (on a property now worth far more than he paid for it) for further investment, or if something goes wrong in the business.

Simple tips to help you save money

  • Draw up a budget - work out what you actually need to spend.
  • Always spend less than you earn.
  • Only borrow money if it is going to make you money by doing so. IF it's going to continue to cost you money (like a car), then you shouldn't be borrowing to buy it, unless you plan to cover all the costs by renting it out!
  • Find the cheapest electricity and gas plans for your area.
  • Turn off appliances at the wall when you aren't using them and switch to gas for everything you can - from hot water and heating to cooking.
  • Switch your phone to VoIP and pay the minimum line rental.
  • Find the mobile and internet plan that gives you the very best value for your usage (or change your usage, if you can!)
  • Believe it or not, it IS possible to feed a family for $50 per person, per fortnight, with $50 in reserve for those expensive vital items like washing detergents and toilet paper. Start using cheaper supermarket chains, local farmers market butchers that sell quality meat by the tray (when they have discounted - take it straight home to the freezer!), and local greengrocers for cheaper fruit and veggies. Or join a co-operative!
  • Reduce your car usage - walk or use a bicycle.
  • Trade in your car for something more fuel efficient and preferably hybrid. Set a fuel budget each week based on how much you actually NEED to drive, and stick to it.
  • Don't buy things just because they are on sale. Decide what you need to buy, and then try to find it on sale, in the right quantity.
  • Find affordable or free outings for your family
  • Use the money you save by doing all of the above to get rid of your debts fast, using my 3-7 year debt elimination plan
  • Keep at least 10% of your income, if possible, as savings towards investments.
  • Don't be afraid to spend a little on education if it broadens your mind, improves your skills, and helps you earn more in the long run!
  • All work and no play makes you very dull. Make sure you have at least some entertainment money so you don't go completely nuts without fun. Just make sure you don't go completely nuts the other way and spend everything!
  • Have a garage sale and save the money from that for investing, or split it up using my Karmic Pigeonholing technique so you don't have to feel guilty about what you spend.

These tips for how to save money are only a few of the ideas out there. They are all things that I have done myself, though, and I guarantee that they do work.

If you want even more tips on saving money, frugal living strategies and living better on less, I highly recommend you visit Frugal Save Wave. It has heaps to keep you going!

Become passionate about how to save money!

How to save money by doing it differently!

My friend Rob Bennet at Passion has also taught me a lot about saving money - with a twist. He talks about saving money with passion for doing so: by weighing up whether saving it or spending it (usually to help you learn or make more!) is a better value proposition. After reading his book, I put some of his ideas into action with spectacular results, so I highly recommend giving his site a read!

All of these saving ideas have not only saved our money, but saved our bacon from the bailiff, particularly in tough times when family members have lost jobs. We have also saved money for investing, even on a very low income.

What's more, we haven't generally had to go without anything, even if clothes did become a bit threadbare while we kept up the internet connection for the sake of keeping business running!

The vital lesson is learning how to save money, while continuing to learn and improve so that you keep investing, and moving forward to financial freedom. If you keep doing just that, adjusting your tactics when things change, you'll soon have enough money to invest in anything you like, from property to shares, to antiques, to education, to holidays!

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