Saving Money [5 Rules]
SUPERHUMAN SCORE: 8
“Saving sounds like you’re giving something up, you’re losing something today. But you’re not. It’s giving yourself a gift today of peace of mind, of certainty, of the large fortune in your future.”—Tony Robbins, Money: Master the Game
Money is a means to freedom.
So, let’s get excited about saving it…
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Enter our first lesson today: The Rule of 72.
Use the Rule of 72 to quickly calculate how many years it will take to double your money.
How it works: Divide 72 by the interest rate. For example, an 8% investment return means doubling your money every 9 years.
Albert Einstein famously said that compound interest was the 8th wonder of the world. The sooner you start investing, the longer the compounding period, the more you gain.
Now you’re ready for the other 4 money rules…
50/30/20 Budget Rule
Allocate your income to these buckets:
- Basic Utilities
- Debt Payments
- Emergency Fund
Side note: Some financial experts advocate for an even higher percentage of savings (by reducing your wants and needs). Consider your unique living situation, be honest with what’s feasible, and adjust accordingly.
1% Rule for Impulse Buys
Use the 1% Rule to curb impulse buys.
If the item costs more than 1% of your annual gross income, wait 3 days.
If you still want the item after 3 days, get it.
Why this works: You’ll often realize you don’t actually want or need that thing.
401(k) Match Rule
Many employers will match part of the money you put into retirement.
So maximize your 401(k) contribution—up to the highest employer match offered.
This is free money.
3X Emergency Fund Rule
Keep 3-6X your monthly income in an emergency fund.
When a rainy day comes, you’ll weather that storm.
The key to financial success is making your savings automatic.
Defaults are powerful because people are lazy. So make savings your default by automating it.
To achieve this, I recommend the book I Will Teach You to Be Rich by Ramit Sethi.
Learn to save and invest money before you see it (401k, debt payments, emergency funds, investments, etc.).
BRINGING IT HOME
“Financial success is not a hard science. It’s a soft skill, where how you behave is more important than what you know.”—Morgan Housel, The Psychology of Money
I hope you enjoyed these tips. But my real wish for today’s newsletter?
You’ll take action—even small steps—to realize your rich life.
All systems go,
Disclaimer: I am not a financial advisor. The content of this newsletter is for educational purposes only (and reflects my opinion). Do your own research and consult a licensed financial advisor. ✌️
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