How to budget, save and invest your money - step by step guide towards savings for the future - START SAVING MONEY

According to a recent article, 40% Americans don't know where there money goes. We all have a tendency to spend all that we earn. When we get a pay rise we think of different ways how to spend more money and improve the life style. What is the use of earning a million dollars and still living in debt? We all like to have a debt-free life. The first step towards a debt free life and attaining a sound financial life style is to learn how to save. In this article, I like to share with you some ideas how to start saving money.

Rule of 72

If you want to make money fast/in less time, the best way to achieve this is by saving money.If you earn one dollar, try to save at least 20 cents. The first rule of saving/ investing is to take it off the top of your salary. You should try to save at least 10% of your salary.This is the suggestion of Bogleheads, a group of reputed investors from Vanguard investment company .

If you don't know what is 'Rule of 72', I like to explain it. This rule illustrates how anyone can transform small savings into large fortune. It calculates, how many years it takes an investment to double its value. If you divide 72 by the annual rate of return, you will get the number of years it will take it for your investment to double its value. For instance, an investment with 8% return will double after 9 years (72/8 = 9) .

Imagine that a child is born today and you want your child to get $1 million in 65 years in a stock mutual fund that pays an average annual return of 10%. How much do you have to pay each day? Infact, a daily deposit of 54 cents will compound to more than $1 million in 65 years. This is the beauty of compound interest and the benefit of having patience to wait.

You may be a person who spends all that you earn. But if you like to/ have a desire to save money. You can try these steps.

1. This month try to save 1% of your salary. For instance, if you are getting $2000 in hand, try to save $20

2. Next month you should save 2% of your salary. So this means next month you should save $40.

3. In the next month try to save 3% of your salary.

4. Within 10 months you should be able to save 10% of your salary.

5. The first rule of saving investing is to take it off the top of your salary. Once you get your salary take out 1% percent of it in the first month and 2% of it in the second month and so on.

6. If you feel that this is not working, probably your bank can automatically take out say 10% of your salary on a preferred date and keep it in savings account/invest in stock mutual fund. This way, you will see only 90% of your salary in the account and feel like spending only that much.

Here are few tips to reduce spending and make a budget that could help you save more.

1. One of the best way to reduce spending is to make a note of how much you spend. Carry a note pad with you for a month and write down the costs and descriptions of everything you spend the money on . You will be amazed at the dollars that slip through your fingers everyday.

2. Commit to invest your future pay increase and maintain the current life style

3. Shop for used items: It is a better habit than doubling your salary. A used hammer or screwdriver works just as well as a new one. More over, you can get it at less than half the price of a new one. if you feel low of buying a used furniture, then don’t let anybody know that it is used.

4. Buy a good used car and pay cash for it. Do you know that General Motors makes more profit from car loans than from cars? Buying new car every few years is the worst of all buying habits. Most cars are brought on credit and makes them more expensive. Credit card companies auto manufactures and dealers all like to have a part of the money that we make in our lifetime.

5. Move where the cost of living is cheaper. You can either move to a less expensive housing area or move to another part of the country where cost of living is cheaper. Thus you get more money to invest. For instance, a move from Boston to Phoenix lowers your cost of living according to cost-of-living calculator at bestplaces.net.

6. Have a second job (side income): Along with your main job you can easily have side income. One way is to earn by writing. Share your knowledge by writing. Many people initialy wonder, what to write? Well, you can write about how to save money , share with the world how you save your money. Or you write about how to find a good lawyer, share with the world your experiences. On the right, I have given a link to a website where people write articles an earn money.

Another way to have side income is to start a week end business. I heard about a guy having a carpet cleaning business that he operates on week ends. Secret of any successful business lies in fulfilling unmet needs and wants. Find a need and fill it. Find a problem and solve it. Find a hurt and heal it. An old proverb “ when a man with experience meet a man with money, the man with money gets the experience , and the man with experience gets the money”, Please be wary of people and advertisements promising people great wealth by signing up for their investment secret seminars.

One of the main objective of this article is to share with you some tips about how to save money. If you have credit card debts or other loans, you should think of ways how to reduce or eliminate the debt and attain the financial freedom. However, not all debts are bad debts, taking a low interest home loan and start a new business is an example for good debts. The key is to keep interest rate low , preferably tax deductible and borrow funds when the expected pay off is higher than the cost of borrowing.

If you like to budget, save and invest your money for the future, first thing to do is to learn how to save money.This is what gives you financial freedom and a debt-free-life. I don't get the meaning of people earning millions and still living in debt.

In conclusion, key points to attain the financial freedom, a debt free life are

1. Saving is more important in the beginning than finding the best performing investment or earning more money. So PAY YOURSELF FIRST

2. Manage your debt load.

3. Determine your financial goal. Have a vision of what do you want to accomplish.

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