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| Attribute this work to: Razor512 |
Step 1: The Problem
Saving money can be a challenge. When I get a pay cheque I become very aware of my needs and wants, but I am not always aware of the amount of money I have in the bank, or how much I am spending. I blindly spend, and don't pay attention to where my money goes. Reflecting on my past jobs, and how much time I have spent working I can't account for where all my money has gone. Frivolous spending is irresponsible.
Step 2: Solution
Steps to saving money:
- Know how much you make and how much you spend.
- Save first, spend later: Automatic Savings Plan.
- Understanding compound interest.
- Start saving sooner than later.
- Something is better than nothing.
- Stay disciplined, be aware, and get rich.
- Calculated how much money I made a month, and subtracted my cost of living from that amount (ex. food, housing, gas).
- After my cost of living was accounted for I realized I had money left over. I went to the bank and discussed my options with an account representative.
- The account representative set me up with an RRSP and a Tax Free Savings Account. Each month money is automatically taken out of the account and evenly distributed into these savings accounts.
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| Attribute this work to: Johanna Hardell |
I am by far the worst person when it comes to saving money. I have a piggy bank that may have 5 dollars in it. I wish I could put a portion of my cheque away but it usually winds up going to lululemon clothes or a trip. My parents started taking money out of my account and putting it in to a RRSP. I am thankful for automatic withdrawal so I don't even know what I am putting away in this fund. I don't know I have it so I don't miss it.
ReplyDeleteBudgeting is key! Thanks for the blog.
Index funds. Mutual funds in and of themselves are a bit dodgy, in that the prospectus you get tends to only mention the ten out of thirty that did really well over the last period, not the ten that more or less stayed flat or the ten that lost money. The idea behind an index fund (there are variations, this is just conceptually the easy one) is, instead of betting on individual stocks -- most people who do that lose money -- you buy a little bit of _everything_ in some proportion (such as, say, add up their market capitalization, work out the percentages each has, and use that as your rule -- all hail spreadsheets!). Over the long run, the stock market tends to do about 8%, so over the long run the major companies in it will average out to about 8%; some win, some lose. That's a nice profit even with inflation higher than usual, and since it compounds over time, by the rule of 72 it's doubling a bit over once per decade. There's almost no management overhead because a computer can do all the allocating and purchasing/selling. Vanguard Invesments grew into a $1.7 trillion powerhouse by doing this, and thereby popularizing the idea of index funds. Look into it seriously -- your future self will thank you (this future me already thanks past me for buying some a decade-plus back; even when things were bad all around, I still broke even, and I've made good profit all the rest of the time).
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