Would you rather be rich or rather be sexy? Is the opening chapter in Ramit Sethi’s book; I will teach you to be rich.
This is your lesson plan on how to get rich:
According to Sethi a fifth of young people think that they will get rich through the lottery. However, of America’s millionaires, 80% are first generation affluent. Meaning that they didn’t inherit their wealth but got rich through controlling their spending and investing their savings.
On average, millionaires invest 20% of their household income. Although most financial advisers typically recommend 10% in the UK, so mere mortals are already at a disadvantage.
This is why:
If you had started investing £10/$10 a week and got a 5% return from your savings after 1 yr you’d have £532 and after 10 years £6,728! if you’d invested £50 a week, then you’d have saved an amazing £33,643.
So the moral of this story is get saving and get saving quickly, saving the maximum you can each month because the earlier you start, the richer you will be.
If you’re in the UK, the government allows you to save this money tax free in a Individual Savings Account (ISA). This can can be in the form of cash or stocks and shares and is subject to annual limits – £10,200 from 6 April 2019 (£5,100 in Cash) but whatever you have in the Cash ISA will come off this total amount. (ie in the cash ISA you can save up to £100 a week, with a week off at Christmas!)
If you’re struggling to find any money to save, go and visit the 50 ways to save £50/$50 maybe you can save enough from there to start your savings account.
I save monthly in an ING direct Internet account because they typically pay good rates of interest and I lock up my money for as long as I can to get the best return and stop me raiding my ‘piggy bank’.
So first of all you need to create your emergency fund, but once you’ve done that you need to :
Set a savings goal
You are more likely to save if you have a savings goal. For example, if you are saving for a house and you need to save a deposit, then you are more likely to hit this savings target if you have a savings goal (say £20,000/$20,000) for the deposit.
Say you set yourself the target of saving £20,000 in 5 years, that’s roughly £10 a day. If you normally go out 3 times a week and spend £30 a time, staying in 2 nights will almost meet your weekly savings target.
If you normally succumb to peer pressure to go out, let your friends know you are saving for your house deposit, then they are more likely to be understanding and not give you so much grief. As most people will recognise that this is a worthy thing to be doing.
What’s stopping you now?