I’ve been an investor for decades now. Overall, I’ve managed to build a portfolio of 17 properties that has risen in value substantially as the years passed. But without first learning to save, I would never have had the means to invest.
I took my first step in investment in 1998 when I put down a deposit on my first property. But as I reflect, I realised that this was not the beginning of my journey to building a better financial future – that began two years earlier.
I was sitting on a beach on a remote Indonesian island with my young wife, digesting the news that we were expecting our first child. It occurred to me that all I had in my name was an overdraft, a sombrero and a dubious-looking cocktail. It was now time to change my habits.
The thing is, transitioning from being a spender to a saver is hard. But I now had a motive and I realised that blowing every cent with a baby on the way was hardly responsible parenthood. As you can imagine, this new mindset was well received by my wife.
At the time, we were living in Hong Kong and I had just started working in media sales. While my salary was low, there were good commissions to be earned. My wife and I worked out that if we were prudent, we could get by on our base salaries and the sales commission could be tucked away.
Within just a few months – and for the first time in my life – I was in the black. What’s more, as the savings bug had set in, we realised that we could save some of our base pay as well as the commission.
Seeing our savings grow spurred me on to sell more and work harder. More commission equalled more money in the bank.
After a year, I had saved around five percent of the price of a two-bedroom apartment in Melbourne’s Southbank. A year later, it was 10 percent, so I put down a deposit on an off-the-plan development to be completed 18 months later. By that time, I had the required 20 percent to settle with an 80 percent bank loan.
I think it’s fair to say that, like me, most investors start out as savers. They have usually developed the discipline to spend less than they earn in order to accumulate a sufficient sum to start building wealth.
Regardless of what your aspirations are for creating a better financial future, the foundations in later success are built today in learning to regularly save money. That means setting a budget and adhering to it. The amount that you save will ultimately be determined by how much you decide to tighten the belt.
But becoming a saver has other benefits besides building a prospective investment pool. The disciplined life of a saver means that you’re more likely to make your savings – or investments – go further in the future.
So here are seven tips that will help you get your saving plan off to the right start:
• Map your spending – record daily, weekly and monthly outgoings to determine what level of your income is discretionary and could be saved.
• Set a budget – know all your fixed costs and overheads as well as other regular outgoings; this will become your savings roadmap.
• Start small – little cutbacks in the first month are easy to adapt to and help pave the way for better financial organisation and greater savings next month.
• Have a slush fund – put a little aside each month for the odd treat or emergency. If you’ve not dipped in by the end of the month, tip it into the savings pool.
• Set up a savings account – quarantine your cash, and look for the best interest rate available. While the returns might not give you a nosebleed, every little counts.
• Have a goal – set a realistic and achievable savings target and go for it. Make sure that it’s within your reach but not without a stretch.
• Don’t quit – saving is hard and there are always unforeseen expenses. If you take a hit, get back on your feet and keep going!