Personal Finance : 4 Ways To Save Money And Improve Your Money Management Skills

Virtually every single person in America who is financially independent started off with nothing. But they acquired good personal finance habits, learned how to save money, and improve their money management skills, eventually becoming some of the most successful people in their communities. And anything that anyone else has done, you can probably do as well.
Save Money by Using a Long Time Perspective

To save money and become financially independent you must begin living on less than you earn even if you are deeply in debt. One of the most important guarantors of your personal finance success is called “Long time perspective.” Take the long view. Develop a long term attitude toward yourself and your financial future and begin thinking in terms of where you want to be in five and ten years. This long-time perspective will have an inordinate impact on your personal finance habits and money management skills in the present, and will help you save money over the years.

The starting point of financial independence is described in George Klasson’s book, The Richest Man in Babylon, as “Pay yourself first.” He says that, “A part of all you earn is yours to keep.” If you just save 10% of your gross earnings every single paycheck over the course of your working lifetime, you will become financially independent and gain personal finance success. In fact, if you saved $100 per month from the time you started work at age 20 until the time you retired at age 65, and this $100 per month earned 10% per annum return, compounded, you would be worth more than $1,100,000 when you retired, in addition to social security pensions and everything else.
The Most Important Money Management Skill

In a study done recently called “One Hundred Million Millionaires” the writers and economists concluded that it is possible for every single adult in America to become a millionaire if they start early enough, consistently save money, and actually plan their personal finance. And since it is so possible and so easy for so many hundreds of thousands and millions of other people to achieve financial independence, it must be possible for you to improve your personal finance as well.

Just imagine! If you only make $25,000 year, but you save 10% of that, or $2,500 per annum, just over $200 per month, you will become a millionaire. But in order to successfully get there, you need to make a decision to improve your money management skills.

Most economists and psychologists agree that the key to personal finance success and is the ability to delay gratification. The reason for financial ruin and failure to save money is the need for immediate gratification. People who lack the discipline to restrain themselves from spending all they earn, have no financial future and can never save money. This is a key money management skill you need to remember in order to gain financial success.
Change Your Personal Finance Habits

Your goal should be to carefully save 20 – 30% of your income each paycheck and to invest that money carefully over the years. Of course, for most people, at least initially, this is impossible. They are too deeply in debt and they have entrenched spending patterns that are consuming 100% of their income or more. So here is a formula for you. Decide today that you are going to change your personal finance habits, save money, get out of debt and achieve financial independence within the next few years. You begin by resolving to save one percent of your gross income. Let us imagine that you are earning $2,000 per month.

One percent of $2,000 is $20. You decide that you are going to save $20 each month. $20 per month is approximately 67 cents per day.

Every day you save 67 cents. Every month you put the month in the bank. And once you put the money into that savings account, you never, never touch it for any reason. This is your wealth account which you never, never touch for any reason.

A remarkable thing is going to happen to you within a few months as you save money. Your attitude toward yourself and money management will change. You will feel stronger and more confident even though you only have a few dollars in the bank. You will be adhering to a budget more closely and questioning unnecessary expenditures.
Growing Exponentially

But the best news of all is this financial accumulation account will start to grow. You will start to get little unexpected dribbles and drabs of money coming in that you promptly put into this account. Instead of the account growing at $20 per month plus interest, by the end of the first year, there will probably be more than $500 in the account. By the end of the second year, there will be over $1,500, maybe even $2,000. By the end of the third or fourth year, you will have several thousand dollars put aside, you will be out of debt, and you will not have to stress about how to save money for the rest of your life.

As you become comfortable saving one percent of your income and living on the other 99%, you then raise your savings rate to two percent of your income. You live on the other 98%. When you become comfortable at that level, you increase it to three percent and then four percent, and eventually up to 20% and up to 25%. Within three years, you will find yourself living quite comfortably on 75% of your income and saving the rest.