How to save money

Save money

This is one of the most important skills you need to learn so that you can create capital and wealth that you can use to grow your income.

You need to understand cashflow. Your inbound cashflow is the money that you receive as an income. You also have your outgoing cashflow which is in the form of expenses.

If your inbound cashflow is higher than your outbound cashflow, you will be able to save money

To save money effectively, you need to limit your spending to what you need. This will allow see you keep your expenses lean, which will give you more opportunity to save money.

In this post, we’re going to breakdown how you can save your money.

We’re going to use a formula based on having a net income of $500 a week to help you get an idea about the costs involved.

Save on your major lifestyle expenses.

Accommodation

Free accommodation.

If you’re in a position to live somewhere for free, then take it. Having no expenses will allow you to maximise the amount of money that you can save.

Usually, you will be able to get free accommodation in the following ways.

Living with parents or family.

They may offer to put you up for a certain amount of time. You can save as much money as possible during this time so that you can prepare to invest with the money that you have saved.

Based on this living arrangement, you will have $500 a week saved before your other expenses.

Renting a cheap room.

You can choose to rent a room by yourself or you can share it with someone else (a friend or a partner). Ideally, you will be living in a cheaper area to maximise the amount of money that you can save.

Depending on where you live, you may be able to rent a room from $80-200 a week.

This will leave you with $300 a week in savings.

Share an apartment or accommodation with someone.

You can rent a studio, apartment, or even a house depending on where you need to live and commute. It will cost you a bit more, but it is still affordable if you share the costs with another person.

You can live in a place for $300+ per week. If you share with one other person, your weekly costs will be $150+, which will leave you with $350 a week in savings.

Minimize liabilities.

Liabilities are assets that cost you money. This means that when you own the asset, instead of it paying you, you have to keep on paying to keep them operational.

Your lifestyle should be structured in a way so that you have assets paying you and not having you pay for liabilities.

Several liabilities will be offered to you. You need to minimize them.

Some of the common liabilities that you will have.

Car

Owning a car is a big liability. Once you purchase the car, it starts to depreciate in value. The vehicle requires service and maintenance that you have to pay for. And you will have to pay for fuel regularly and possibly parking.

If you don’t have to use a car, then opt for public transport or even hire a vehicle as and when needed.

Credit card

A credit card grants you a line of credit that you can use to purchase items. In exchange, the lender will charge you interest on the loan in the line of credit.

If you use a credit card in the wrong way, you will find yourself incurring the expenses from the loan and interest amount and you will have to continually pay for the expenses.

Avoid having a credit card unless you know how to find and use a credit card strategically.

Property ownership

If you own a property that doesn’t pay you an income, and you find yourself paying for its expenses such as a mortgage, rates, maintenance, etc; then the property is a liability.

Mindset

Thing in your lifestyle will change over time. You need to learn how to reframe your mindset from saving on expenses as much as possible to the positive return on investment that you will get for each dollar that you spend.

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