Get Your Savings Plan in Shape for 2008
By SmartProInvesting.com Investing Education Team January 7, 2008
The money to invest in stocks and other financial assets is certainly not the one meant for foodstuff for the family. Or your rent or some of the other critical family running costs. If you did that, you would certainly end up with other problems that will possibly upset things at home. That logically says that you need to create a fund for your investments. Simply put, you need to save for investment.
As we have stated elsewhere on this site, it just isn't easy to save money. Many pressing needs chase after your limited income and in that circumstance, it's easy to justify not saving. For many, it would look impossible to attempt to squeeze further to have a reserve. That's a tough struggle. If it isn't for you, we'll be happy to hear your formula, for the benefit of our other readers.
What is unarguable, though, is that for your future to get financially promising, you must work out a solution to the savings challenge. If you don't learn to save (and then invest), you deny yourself the power of multiplication and you simply reduce yourself to the barber's chair phenomenon: motion without movement. You will sweat to run your finances each month, but at the end, you're in the same spot, with no growth.
Make 2008 Powerfully Productive
One way you can make 2008 a striking year in your life - and one that could define a new approach to the future - is by beginning this early to program your savings strategy and going forward to work
strictly with it. See, even traditional farmers know that if they don't keep aside the stuff to replant in the next farming season they'd soon fizzle out of the business. That's why they select and preserve the seedlings and go on to replant them. If your financial life falls short of that regeneration and expansion mechanism, you will stultify and possibly encounter plenty of avoidable financial crises. To build financial power, you have to invest, and to invest, you must squeeze out from your earnings. Here are some ideas to help you get a grip on the savings challenge:
Don't Take it For Granted
It's easy to fall to the temptation that things will work out on their own. That's a big mistake. They won't. You have to design what works for you and the earlier you face it, the better. Note, too, that while it's possible to understand the difficulty it entails, that doesn't sound like sufficient excuse to constrain your progress. So, take it as a challenge to do the things that will advance your life. Building financial strength can't be taken for granted and you better condition your mind to that purpose.
It Needs a Deliberate Plan
Whether you use a spreadsheet, a scrap of paper, a software, or whatever, it's important to know that you will do better with a plan. That forces a budget and compels prioritisation. Budgeting will compel you to look carefully at your spending profile and to decide what really matters. That way, you can trim off what may even be important but not indispensable. It will also ensure a provision for savings and investment, without leaving that to chance. It will force you to look at your earnings to see if you have to and what can improve the inflow. You actually take deliberate control when you take time to plan your finances, including what happens in the medium- to long-term.
Discipline is at the Core of Success
The most important factor of success is the discipline you bring to bear on your program. Many factors will work to derail your effort - tempt you to defer action on savings, push you to accommodate that not-too-necessary spending, throw up immediate problems that overshadow your long-term interest - but it's the discipline factor that will win the battle. Discipline means steadfastness, consistency. Can you challenge yourself to act consistently on your savings plan? For more on how you can 'practicalise' a disciplined approach to saving, read Key Steps to a Consistent Savings Habit.
It's All in Your Interest
Your financial growth and success is all for your benefit. What to realise is that there is a price for every good thing. It doesn't help to expect and even long for financial success without being ready to work for it. A solid savings and investment habit is a powerful tool for that success and savings precedes investment. Check this Charlie Munger quote: "I had lived way under my income for years, saving money." Now, if you know that Charlie Munger is Vice Chairman Berkshire Hathaway Corporation, the diversified investment corporation chaired by leading investor Warren Buffett, you will appreciate where his savings habit has gotten him.
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