DON”T BE CHEAP, BE FRUGAL.
Why on earth should someone listen to me about saving? Anyone who knows me personally knows one thing, I am a very good money saver and equally good investor.
I am saving 100% of my primary income and most of my Passive income and I am a self-made millionaire. How is that possible? That is for another blog, that is why you should subscribe to my newsletter.
- Education for your kids
- Investment and Building Wealth
- Rainy Day Fund
- Better lifestyle
- Peace of mind
- Financial Freedom
EXAMPLE OF TURNING $375 TO $1 MILLION
Let’s look at the picture below – You started with $375 per month at the age of 30 and you will invest around $225,353.16 in 35 years and it will be compounded over time to become $1 Million dollars.
If you look at the chart closely, you will see you are not even close to million dollars around the year 25 and most of the people quit because they think it’s not possible. But that’s when you hit exponential growth because of compounding. You will still make it close to a Million dollar even if you stop investing anymore around year 25th.
So, the point here is to start small and start early. It’s very difficult to catch up if you want to start when you are around 35 – 40-year-old.
There are a lot of people who make a lot of money, but their wrong habits make it impossible to save. This is much more common than you think. People take pride in some of the things listed below and it’s very difficult to argue with them but it’s their loss. They need to understand if they want to live a peaceful life vs show off life.
LET US GET TO THE POINT AND START THE TALK
BUYING CHEAP STUFF
You may wonder how not buying cheap stuff will save you money? Trust me, It will. Buying cheap stuff is a waste of your money and you look cheap on top of that.
Main idea here is to buy less but buy high quality. You should consider spending double and buy quality; it will last you longer and will save you money in the long run.
After moving to Montreal, Canada, I bought my first winter boots for around $100 and it lasted just one winter, they were ugly and heavy to wear. Next year I went for even more cheap shoes as I lost my boots in 1 year thinking why spend more if it is going to last me just 1 year. You know the results; they last just 1 year. So, now I am down around $150 in 2 years without any boots and went through an awful experience.
So, I thought of spending more and so bought my 3rd set of boots for around $300 which is not much compared to how much I already wasted in the first 2 years. You will not believe; I am still wearing those boots. They look amazing, very comfortable and save me money every year passing.
EXPENSIVE PHONE PLANS
Do you know the difference between iPhone 11 and iPhone 12, NOT MUCH?
But people are crazy to get the latest model, without caring about how much it costs you out of your pocket. Latest phones come with expansive monthly plans; I don’t mind paying one time for something extraordinary, but I don’t like the way companies make us pay extra every single month.
That is why I try to look for the previous version of iPhone (Either iPhone X or iPhone 11) and it is available with much better deals and much less to pay each month.
BUYING NEW CAR
Buying new care must be one of the stupidest things ever. Just buying new vs used car can make a huge difference, you can either die middle-class or can retire as a millionaire if you invest the saved money in index funds instead.
We saw above how $375 can be turned into Million dollars over time, it is possible to save $375 by just not buying a new car. I think a 3-year-old car is the best purchase, it’s still very new and still under warranty, you can get this car at least 30-60% cheaper than buying a new car.
BUYING SUBSCRIPTION \ RECURRING COST \ REPEATING COST
What exactly is this? It is a long list of items for which we pay every single month
Phone, Netflix, Amazon Prime, Disney +, Online News subscription, Cloud storage, Storage units, Car payments, Rents, Drugs, Smoking, Alcohol, Hair cut etc. Of course, some things we cannot live without these days like phones or Netflix. Main point here is to be aware of what is happening and how every company wants you to keep paying over and over.
This is how Microsoft changed their model, everything is subscription now. They do not want you to buy their product in one shot deal. They want you to keep paying every single month for your whole life.
I am not scared of buying something expensive, but paying every single month really scares me.
I do not need to talk much about this, CABLE IS DYING.
If someone is still paying for cable, NO ONE can save him\her.
WASTING ENERGY (ELECTRICITY\GAS)
No one should waste energy regardless of their situation.
Use of unnecessary light bulbs, Car gas (Buying big cars), multiple cars, long showers with hot water, leaving the TV on, using very high temperature at home during winter etc. It is a long list, and we can keep writing. It is important to note, everything is costing money.
Little savings here and there can start small investments into INDEX funds. It doesn’t take a lot to build Million, we already saw how $375 does the magic.
We just need a place to live and it needs to be a decent place, I am not saying to live in a one bedroom. It must be a decent place with 2-3 bedrooms and a couple of washrooms, I cannot understand why people buy very expensive homes. What is the point?
Expensive homes come with many other expenses, of course monthly mortgage payment is going to be big but not just that, you will be paying a big fat bill to the city for property taxes and then Insurance. I cannot even think about maintenance cost, imagine the cost of cooling and heating that big damn thing.
It is just a big element which costs arm and leg to maintain social status.
UN-NECESSARY HOME RENOVATIONS
There is necessary maintenance and then there is unnecessary renovations to look good or for keeping up with Joneses.
I would like to live in a house with a brand new kitchen and washrooms, but investment is more important instead. I will spend my first 10-15 years investing and will not waste my earnings in renovations to impress others.
Time is the most important essence for investment to grow, you will need much more money in later years if you choose to delay your investments.
Weddings are such a waste of money, maybe you will find out after a few years of your marriage :). Celebrations are supposed to be for yourself, not for other people to see how much you can spend. I know it is not like you are getting married every single day, but you need to live with the expenses for the rest of your life or until you pay it off.
There are other ways to enjoy your special day instead of wasting money, weddings can be done in a simple way and you can enjoy a better vacation with the savings and still keep a lot of money in your pocket.
I have a friend who has a budget of spending $10,000 per year on vacation, it’s her choice but it’s difficult to digest. It is crazy how much money people spend on vacations and then they miss it even more. It looks good on Instagram for sure.
I find travelling abroad is so hectic with the young kids, who in their right mind will take kids and big suitcases to travel. It is a different story though.
I found a best way to vacation with minimum cost, I get enough points on my credit card to book hotel for few days within Canada and I try to keep it within driving distance of 5-6 hours,
Mainly we are spending money on our food, other costs are almost covered with credit card points. It is so inexpensive that it’s difficult to beat. People come to Canada for vacation, why should I be going out? I never understood why people spend so much money to travel abroad when you can have such an amazing vacation just at driving distance. Important part of vacation is to have fun and get away from busy schedules.
EXPENSIVE PRIVATE SCHOOLS
Your kid’s success does not depend on expensive private schools, it depends on the kid and the parents. It depends on how you as a parent are working and supporting the kid to be better.
It’s very difficult for kids to succeed without parents’ support. It’s important to focus on building good hard working ethics instead of focusing on expensive private schools.
EXPENSIVE MASTER’S DEGREE
It is very important to get a good education; it gives you a start. It won’t make you rich or anything, but start is important to get anywhere.
But is it really worth spending thousands of dollars on a master’s degree, especially not before getting some experience for a few years. There have been many studies done to prove that it doesn’t help us as much as we think and there is a lot of information available these days on the internet to learn.
It’s not just the money, it’s also your time. Any business started now has higher chances to succeed compared to someone who waits a few years to do a master’s and has a lot of education debt.
NOT TAKING ADVANTAGE OF FREE MONEY
It sounds so stupid that someone won’t take free money offered by their company or government. But it is more common than you think.
What kind of free money am I talking about?
Do you know companies provide up to 1-4 % of your salaries matching the amount to deposit in your Pension\RRSP\401 K account? All you have to do is deposit the same amount from your side and your company will match the same. For example, you are making $100,000, you will be required to deposit $4,000 (calculated at 4%) to your RRSP account and your company will deposit the same. So, you have a total $8000 available to invest within your RRSP Account.
On top of that, you will save Tax for all the money deposited to your RRSP Account.
In Canada, the Government gives you about 20-30% (on maximum amount of $2500) for your children’s future education fund (RESP). All you must do is to deposit any amount between $1 – $2500 and get a maximum of $750 (on $2500) deposited to the RESP account for free and you can invest that money within the account to grow over time. My kids are just 7- and 4-year-old and I already have $40K saved up in their RESP account.
BUYING UNNECESSARY STUFF
It is all about understanding your wants vs your needs.
Eating a good quality meal is a need but eating at fancy restaurants is a want. Buying a simple watch is a need but buying an Apple watch is a want.
I have seen people buying unnecessary stuff so much that they have no idea how they run out of their whole monthly pay cheques. It is more about self-awareness and fulfillness.
Once you know that these new items don’t make you happy, it may give you pleasure for a short time. But it puts more pressure on you to buy more and not save enough. It is an unnecessary addition of expenses and you better stay away from this.
MAKING WRONG CAREER CHOICES
It’s not GOD, it’s people who choose what they want to do in their life.
It is difficult to save money if you are not making enough money. These choices are made much earlier when someone is doing their schooling. There are professions which pay well and do not even need high IQ. It does not have to be a doctor to make a lot of money, there are people who are not as smart as doctors, but they make a lot of money.
It is important to learn a skill set, learn Sales or Marketing.
There is a difference between eating out on special days to celebrate birthdays, anniversary, special achievements vs Eating or taking out food every single day for Lunch or dinner or buying morning coffee.
I am so surprised to see long lineups at Tim Hortons drive through every single morning, sometimes, all you must do is wake up 5-10 earlier to have that extra few minutes to make the coffee or prepare your lunch. It is so easy to have lunch prepared from last dinner leftovers. No one can save you if you struggle with this.
THINKING SHORT TERM
ROME was not built in a day. It takes time to build wealth.
People never plan about their future and never invest to create wealth. It is too late by the time they realize this.
It does not take a lot of money to create wealth of over $1 Million dollar, it just takes long time thinking, persistence, and small investment over time.
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