In life we all make mistakes like that time you've been to an oatmeal cookie
thinking it was chocolate or the time you took back your ex because this time
things will be different while these mistakes are rather benign there's one
mistake that most people make with their money that if continued will have them
toiling in financial mediocrity forever today we're going to be talking about
what that money mistake is and how you can sidestep it to ensure that it
doesn't slow you down and if you're new to the channel then hit the subscribe
button below for more life-changing content growing up if your parents gave
you any financial advice at all it was probably to save your money you see if
you're like me then your parents weren't exactly rolling in cash during your
early years and as such if they wanted any chance of having a dollar to their
name they had to be strict in their savings efforts i will tell you that
while my parents didn't teach me how to start a business or negotiate my salary
they did pummel into my head the importance of saving unfortunately not
everyone is so lucky or unlucky depending on how you see it over the
last year or so i've become acutely aware of the financial struggles that
people are facing every single day i don't think a day goes by they don't see
some shocking headline or statistic announcing how much people are
struggling like the study from march of 2021 that stated that 49 of americans
save less than 500 a month when i hear of tough financial situations like this
one it makes me wonder where people are going wrong in their savings efforts and
i've boiled it down to three main issues first there are simply a ton of people
these days that have no discipline or self-control that allows them to
sidestep any spending temptation that comes their way maybe they're in a bad
relationship and need to show up to get over their recent fight or maybe they
feel insecure if they don't wear a new suit to the office every week the point
is that there are a ton of people spending quicker than their money is
coming in and when this happens we get those unfortunate statistics i was just
talking about now the fact that overspending is crippling to your
finances is not news to you but what i'm about to tell you may get your attention
my controversial stance is that having the habit of overspending in my opinion
is no better than people who routinely save too much money now i know what
you're thinking what's so wrong with saving too much money and let me tell
you there's a lot wrong with it while saving is a crucial part of getting
ahead financially it can be overdone you see those who save a ton demonstrate a
general lack of awareness of the importance of growing the money you make
i can't tell you the number of people i see cashing five figure checks each and
every month and letting that money rot in their bank of america accounts doing
this is like getting fresh fruit from farmers market and letting it go bad
because you left it out in the sun the third and final reason why people aren't
saving money is due to the fact that they simply do not make enough money to
save yes the situation exists and it's in part due to the fact that the federal
american minimum wage has not increased in over a decade right now over 1
million americans are earning the federal minimum wage of 7.25
and when you're collecting 500 paychecks every two weeks even meeting your basic
living needs will be a challenge so at this point you're probably wondering
what the correct amount of money to save is i've told you that it's extremely
consequential to boil your money to save all your money and that working for
minimum wage is a death sentence to your financial progression now perhaps you've
been doing your own research and have been hearing that you need to save 10 of
your income this is probably the savings target that is most widely disseminated
and it's also where we will start a discussion on the biggest saving mistake
people are making yes i said it saving 10 percent of your income is a mistake
and here's why for the uninitiated the rule of saving 10 originates from the
book the richest man in babylon where the author recommends that for every 10
coins that will place this within my purse take out for use but nine thy
purse will start to fatten at once and its increasing weight will feel good in
my hand and bring satisfaction to thy soul in layman's terms make sure you
save some money for yourself so that your bank balance continues to grow
larger every single month sounds like a solid plan right sure it sounds
fantastic if you're someone who hasn't saved a penny since vietnam but for
those of us who are regular savers who want to achieve above average financial
results and this is some terrible advice to follow here's why the 10 savings rule
fails people who follow it for three primary reasons each one holding you
back from the financial progression that you want and deserve the first reason
the 10 rules should be avoided is because it gives you a sense of
accomplishment that is actually detrimental to you in the long run you
see when people advise that you save 10 of your income and you follow this
advice then you can pie yourself on the back and move on with your day it's kind
of like going to spin class and giving 50 effort sure you can post on social
media that you worked out but if you're being honest with yourself you would
admit that you could have tried harder and gotten more out of your workout
saving just 10 of your income is the same you're likely not digging deep
enough to start to see the financial progression in your life that you want
but are comforted by the fact that at least you're following the savings
advice that is being dispensed by all the financial gurus around you now the
second issue with the 10 rule is that it gives you little chance at making a dent
in your loftiest financial goals again i think too many people get swept up in
the practice of following general saving wisdom and never really consider what
the end results of their actions would be later on in life for instance you may
be saving ten percent of your income but on your three thousand dollar monthly
income that ten percent is not going to take you as far as you think if you
invested every last penny of that three hundred dollars every month for the next
forty years at seven percent you'd end up with seven hundred and eighty
thousand dollars now you may be thinking three quarters of a million dollars
that's a lot of money but is it really 40 years from now that 780 000 will only
be worth 290 000 in present-day dollars after inflation and i think that we can
all agree that it would be near impossible to retire on 300 000 anywhere
in the western world therefore as we start to run the numbers the credibility
of saving 10 of your income starts to fall apart now one may say that this
issue could be avoided simply by making more money and this is true if you're
making fifty thousand dollars a month and investing five thousand dollars then
financially speaking you're gonna be doing all right however what if i told
you that saving ten percent of your income is actually hindering your
ability to make more money do i have your attention now remember how i told
you that when you follow the widespread advice of saving 10 of your income that
it makes you feel like you did right by your money that you did enough well
unfortunately this false sense of accomplishment also neuters any drive
you'll have to go out and make more money instead of thriving to push your
savings and investing limits you'll default to telling yourself that 10 is
enough because that's the advice that's been whispered in your ear however as i
just pointed out if you're not presently a high income earner then you're going
to need to be pushed to make more money unless you want to be working until
you're in adult diapers therefore by following the commoner advice to saving
10 you're likely dampening your inner drive to make more money and as you've
now seen this can have extremely deleterious effects on your financial
health in the long term okay so now that if thrown at you every single reason
saving 10 in your income is inadvisable let's shift from focusing on problems to
focusing on solutions so first to answer the burning question that's in your mind
right now the savings target you want to aim for is not 10 percent but 50
instead now i know some people probably just had their windpipes tighten up when
i said 50 but hear me out because this is for your own good for the average
income earner saving 50 of your income is the only way that you'll be able to
amass enough future wealth to be able to survive long term let's reflect on that
investing example i brought up earlier if you're making three thousand dollars
a month and save ten percent you're only investing three hundred dollars however
if you're saving investing fifty percent then you'll be contributing fifteen
hundred dollars a month instead under the same conditions of forty years at a
seven percent rate of return this will leave you with just under four million
dollars a much more reasonable number to retire on now hopefully this example
shines light on the importance of a high savings rate but the next question is
how the hell can you achieve it don't worry i have the answer to that question
too the first step in achieving this lofty savings rate is to review all of
your expenses start by organizing your monthly expenses from the largest to the
smallest and ask yourself if these costs are necessary and if they are how they
may be able to be reduced this exercise alone can help boost your savings rate
but probably won't get you up to the 50 mark as such there's still a bit more
work to do this is where making more money comes into play given that you've
broken free of the shackles of the 10 savings myth you should have the inner
drive to go out and make more money i know for myself personally earning more
money through freelancing which i teach people how to do my course side hustle
success was my ticket to a 50 savings rate because it's much easier to
increase your disposable income through earning than it is through cutting costs
remember i said earlier that we all have a certain baseline of expenses we have
to meet monthly however our ability to earn more income is only limited by our
skills our motivation and our time now obviously you aren't going to be making
it rain the second you start to put in place other methods of making money and
that's perfectly okay in fact i recommend that people take a slow and
methodical approach to increasing their savings rate if achieving this gold
standard for saving is something you want to do then here's the approach you
should take first after cutting expenses determine where your present savings
rate stands let's say you're at 15 once you have this baseline figure the next
step is to identify some income generating activities that will help
boost your income and ultimately your savings target this could be freelancing
starting a side hustle or simply picking up a part-time job on the weekends once
you have these new income sources in place your goal should be to raise your
savings rate by five percent every six months this means that if you're out our
example 15 then it will take you three and a half years to get there i know for
some this seems like a long time but getting to a 50 savings rate is no easy
task and as such there's no need to place unnecessary strain on yourself to
get there that being said there's nothing stopping you from speeding up
this process if you're making four thousand dollars a month and with your
side hustle can increase that to five thousand dollars then scaling up your
savings rate to 50 may come quicker than you think one
important point of caution is that as you start earning more income you need
to steer clear of lifestyle inflation it'll be tempting to spend some of that
extra money coming in but if you're serious about saving 50 of your income
and unlocking more financial success than 99 of other people ever achieve
then you need to push down those temptations to spend whenever they arise
therefore while general financial wisdom does have its place saving 10 of your
income is a mistake you want to avoid and now you know how much you should be
saving and the steps required to get there hey it looks like youtube thinks
this next video is the one that will change your financial life forever give
it a watch and let's see if they're right