It’s time to save money for your future

Many aspiring entrepreneurs dream of starting a business with a small sum, to turn into a million-rand juggernaut. After all, every business has to start somewhere.

If you’re looking for advice or inspiration, there are plenty of entrepreneurs out there who have turned themselves into household names while achieving their financial dreams.

Is saving easy money? From a distance, it appears to be. But, when it comes down to it, it’s challenging especially when starting with a low amount.

The first question you need to ask is how to start, because most of the time starting is the hardest part about saving for any goal.

Here are ten pieces of worthwhile advice on saving from people like you who made a fortune:

Consider every purchase in terms of cost per hour

Having the discipline to save 70% of your income, could seem impossible, especially considering that the prices of basic needs like bread and milk keep rising. But, that’s exactly what JP Livingston did to be able to quit her job at 28 – with USD2 million in the bank.

Her top piece of money-saving advice comes down to a shift in mind-set: Don’t take prices at face value, but consider them in the context of how many hours of work it would cost, a strategy she picked up from Vicki Robin and Joe Dominguez’s book, “Your Money or Your Life.“

“If you think about how much you earn and you divide it by the number of hours you work, you get the amount of money per life unit,” explains Livingston. For example, if your cost per hour is R100. That means it would take you 20 hours of worth of work to afford your R2000 worth of groceries, which certainly puts things into perspective, doesn’t it?

The advice

“If you think of things as not just what you save that day, but having that money work for you and compound, it will totally change the way you spend money,” she continues.

Pay off your debt

“People who have a lot of debt and loans don’t have the cash flow to save in the first place,” says Scott Wellens, founder of FortressPlanningGroup and host of the “Best in Wealth” podcast.

He continues to advise that if you have debt, you’ll end up paying interest to the credit companies instead of earning interest on your savings.

The advice

“The best way to start saving money is to get out of debt as quickly as possible and have the discipline to stay out of debt. You will be surprised at how much money can be saved on a monthly basis if you kick debt out of your life,” he advises.

Invest in your future by paying off your debts; this is a guaranteed return on investment because you’ll have more flexibility with your financial decisions.You’ll know what to expect and, as you pay off each debt, you’ll have more money to achieve your financial goals with.

Track your expenses

You need to have a clear view of your accounts, how much you earn and how much you spend on expenses.

“Too many adults do not have an accurate view of their income and expenses,” says Bily Xiao engineer-turned-advisor and founder of WealthMobius.com.

He says that if you measure your income, you can improve it. “So start tracking, take stock of how much you’re saving, identify low-hanging fruit of expenses you can cut, and start setting some incremental goals to increase your saving. Make use of great tools like Mint.com (syncs with your financial accounts) or YouNeedABudget.com (more manual and private) for tracking,” he explains.

The advice

Do the math and figure out which deal is truly the best for your finances in the long run. Not only will this technique help you to save money, but you’ll be able to reduce the amount of interest you earn paying items off each month.

Keep a careful eye on your savings

Kristy and Bryce Shen were able to save USD1 million by age 31. They quit their jobs as computer engineers to travel the work, thanks to a diligent habit of tracking their money. “I think tracking is absolutely paramount,” says Shen. “That’s one of the things that would help people a lot financially.”

The advice

“Even if you blow the budget once or twice, it’s not a big deal. Everybody makes mistakes. I made mistakes, too,” explains Shen. “Being able to track it allows you to see: ‘Hey, look! I’m going in the wrong direction. It’s not going towards my financial goal.’ So then you just move back toward the right path, and then you’re good to go.”

Don’t lose your happiness to saving

When embarking on this goal don’t forget to live your life. Yes you want to achieve your goals, but you don’t want to make yourself miserable while doing it. “I went so hard-core that I made myself really unhappy during the process,” says Mad Fientist during an episode of his “Financial Independence Podcast.”

He kept a meticulous spreadsheet, which helped him to organise and monitor his spending, investments, and net worth, while saving 70% of his after-tax income.

The advice

Yes, you have to be patient, determined and persistent, but avoid becoming consumed with saving that it isolates you.

“I just didn’t want to do anything that involved spending money,” he says. “I just wanted to get there as soon as possible.”

He advises that you need to focus on the power that you’re receiving along the way with the money you’re saving up. Use that power to make your life better along the way. “Don’t sacrifice happiness for that final number in the bank,” he advises.

Optimise your earnings

The key to building wealth is optimising your earnings says Chad Carson, who lives off passive income from 90 rental properties. “Particularly in your first 10 years, if you make mistakes of buying emotionally on your residence as opposed to buying in a very calculated manner by making your residence a house-hack or a live-and-flip, or just renting and investing that somewhere else, the magnitude of that mistake is huge 20 to 30 years from now,” explains Carson.

The advice

Carson lived in one room while renting the other rooms of a property to cover the bond repayments. With his costs covered he used his salary to build a nest egg and buy more rental properties in his hometown of South Carolina.

Now, he spends just three to five hours a week managing his rentals from Ecuador, where he lives with his family.

Automate your savings

When trying to save seeing that money in your account can be tempting, but if you create a debit order from your account to an investment account you can save every month without being tempted.

“Determine how much you can afford to save each week or month based on your personal income and spending,” says Jamie Pomeroy, Financial Advisor at Merchants Bank.

The advice

“Once you have established a budget and have clear short- and long-term goals, one easy way to get in the habit of saving money toward those goals, is to simply automate it. Set up regular and automatic deposits into your investment and savings accounts,” Pomeroy explains.

Re-acquaint yourself with being frugal and develop a side business

Joe and Ali Olson now spend their days traveling around the world with their 1 year-old daughter. They were both public school teachers, and they were able to quit their jobs with USD1 million in the bank, retiring after just eight years in the workforce.

They started out by buying properties for a steep discount. They initially lost money, but when the market turned they began turning a profit. By the time they quit their jobs they owned 15 properties.

The advice

They managed to live on USD20 000 a year without any major sacrifices. But even as they saved, their lifestyle didn’t succumb to inflation. They continued to save 75% of their income and resided in their 37- square-meter home. “We cultivated a concept of gratitude about everything,” Ali said. “And once you’re grateful for everything you have, to try to get more seems silly.”

Embrace the challenge

Peter and Simi Adeney were both software engineers. They stashed two-thirds of their combined USD134 000 take-home pay in savings. After 10 years they had USD600 000 in investments and paid for a house worth USD200 000.

But the road to financial independence isn’t easy. In fact, it’s loaded with challenges.

The advice

“What it boils down to is enjoying hardship and practicing voluntary hardship every day,” reveals Adeney.

“We’re trained in this country to avoid difficult stuff. And so that’s the first thing I think you need to get rid of if you want to get anywhere that’s different from the other people.”

He continues to say that even if you’re just starting out, cutting down on the extravagant purchases makes the whole process efficient. “Suddenly, you can earn more money and you can spend less money because you engage in this quest to make your life better, which happens to involve doing difficult stuff.”

What are you waiting for?

Between, Justin McCurry and his wife they managed to save up over USD1 million in nine years. Their net worth continues to grow thanks to their investments and currently sits at USD1.7 million.

“When you’re still young, how you save doesn’t matter as long as you’re actively putting away money one way or another,” explains McCurry.

The advice

“Figure out how to invest it as you go along. The planning aspects of it, how much you need to save, your budget, your withdrawal rates, and all that — that’s a lot easier to figure out later in the game,” he advises.

Time is one advantage you’ll never get back so if you’re planning to retire early, don’t worry about knowing everything there is to know about taxes and investments. “Start saving today, and then get smarter at tax planning as you learn more, as you go along,” says McCurry.