Dad's Savings Advice to His Child
Hi Bren. I’ve been meaning to talk to you about saving and budgeting since you moved out of our home and into your new apartment. I wanted to give you some financial advice that I wish someone had given me at age 23. It is our reponsibility as parents to teach our children how to save and manage money. I hope your Mom and I have done a good job of that but just in case I wanted to share some important financial basics that will help you become financially successful in life. So here goes:
- Live below your means – Make sure you set aside 20% of every paycheck and learn to live off the remaining 80%. Do this no matter how much money you make. If you get a raise or bonus set aside 20% of that raise or bonus in addition to the 20% on your regular pay.
- Don't spend more than 25% of your monthly net pay on housing. It doesn't matter if you own or rent. Stick to this 25% rule.
- Don't spend more than 10% of your monthly net pay on entertainment. We're Irish, so by entertainment I mean bars. But, all kidding aside, this also includes movies, restaurants etc.
- Don't spend more than 5% of your monthly net pay on auto loans and never lease. Leasing is one of those Poverty Habits you've heard me talk about over the years. Buy your cars and take good care of them.
- Stay away from accumulating credit card debt. If you are doing this it means you are living beyond your means and you need to cut back on something.
- Always invest your savings prudently. Never gamble your savings on get rich quick schemes. There's no such thing. The power of compounding can grow your savings and make you wealthy. Saving just $250 a month over 40 years will produce $500,362 at a 5% return.
- Max out your contributions to the company retirement plan. If the company matches your contributions, great. That’s free money. Always take free money when you can get it.
- Know what you spend every month. Create a monthly budget and track what you spend.
One last point I want to make. Most of the wealthy don’t make a lot of money. But they do save a lot of money. They make a habit of saving until it hurts. Focus on accumulating wealth and if you get a big pay day, great. It's icing on the cake. If you stick to the 20%/80% rule you will save a lot of money and you will be wealthy long before you reach retirement age. You will be one of the few among your friends and colleagues because, unfortunately, most parents don’t teach their kids the importance of saving, so nobody saves. Accumulating wealth is not about hitting it out of the park. It’s about getting singles. You get enough singles and you win the game.
I love you very much
About Tom Corley
Tom Corley is a #1 Amazon Bestselling Author. Corley understands the difference between being rich and poor… At age 9 his family went from being multi-millionaires to poor in just one night.
Tom spent five years studying the daily activities of 233 wealthy people and 128 people living in poverty. Tom discovered there are vast differences in the daily habits of the two groups. During his research he identified 149 daily activities that separated the “haves” from the “have nots.” The culmination of his research can be found in his #1 Bestselling book, Rich Habits – The Daily Success Habits of Wealthy Individuals (www.RichHabits.net).
Tom is a CPA, CFP and holds a Master’s Degree in Taxation and is President of Cerefice and Company, CPAs as well as the CEO of The Rich Habits Institute, an organization dedicated to Rich Habits training and rich Habits education learning sessions.
Tom has shared his insights on THE DAVE RAMSEY SHOW, MARKETPLACE MONEY, WABC, WCCO, KOA, KDKA, KKOB and more than 1,000 other radio stations in the U.S., Canada and Australia, a host of print media publications and many TV shows including Yahoo Finance’s Financially Fit with award winning host Farnoosh Torabi (Today Show, Kelly and Michael, The View).
Tom’s number is 732-382-3800 Ext 103. Email: TOM@RICHHABITS.NET