Saving money is a tough endeavor for many people, at a young age your mind begins to understand in order to acquire something you want, you need to expend money. You’re literally bombarded with commercials on what to spend your money on, where to spend your money, and they make it easy for you by banking on instant gratification. The plight of the consumer is a great business model for companies selling a product, it’s not good for the consumer spending it. Granted, there’s times when spending money is absolutely necessary as it allows us to enjoy the splendors of life, but this comes at a price. Each individual must work to attain this money initially, and the actual cost is not in terms of dollars, but by comparable work necessary to gain that hard earned cash.
Imagine this: according to LaborLawCenter the federal minimum wage is $7.25 an hour http://www.laborlawcenter.com/t-federal-minimum-wage.aspx At 40 hours a week an individual working at a minimum wage job will take home $290 before taxes and withdrawals are factored in. Imagine for what second what that $290 does: The average car gas tank is 15 gallons, the average price for a gallon of gas (at the time of this entry) is $2.72 per gallon at a total cost to fill of $40.80. With an average work day of 8 hours, this individual would have to work a little less than a full day just to fill his/her tank of gas.
Explained above is what I call the “Actual Cost” of any good or service available to be exchanged for money. What’s listed on a price tag as $600 dollars I see as a full week of work. What’s listed as $7.00 I see as an average tip from a table. Using the term Actual Cost is an easy for me to determine if something is worth me spending my hard earned money on. Can I wait 2 months to buy a brand new phone or do I need to work 3 extra days to get the money necessary? Of course, depending on what you do for work, picking up 3 extra shifts isn’t possible and it can be exchanged to working over time for others.
Thinking in terms of actual cost can be a bit depressing if you really think about it. A house that has a price tag of $200,000 can be seen as working four straight years at $50k per year without spending money on anything else (luckily there’s financing, we’ll get to that another time). As you can see Actual Cost is a great way to differentiate between what is a want or need.
Working for money is great for many people, having a career is a satisfying experience and leads to a well rounded lifestyle. However, work isn’t always fun, that’s why it’s called work. Wouldn’t there be a better way to get this hard earned money without sacrificing your time being in some boring office for 8 hours a day?
Enter saving money. The idea of saving money is to make your money work for you allowing you to do other things free from work. Some sayings, tips, and facts:
- “The most powerful force in the universe is compound interest” Albert Einstein
- Online banks with little to no overhead have the better interest rates available for simple savings accounts. I use ING Direct
- Having 3 months worth of expenses saved is common practice for people in the event something unforeseen happens
- Additionally having $500 readily available covers most emergency situations
- If you have 401(k) then you should already be enrolled in it, most companies will match what you contribute and can help you towards retirement – it’s free money people!
- Having a diversified portfolio is the best way to make your money work for you, distribute your money equally across various investments that range from low to high risk
- The higher the risk, the higher the yield: the converse is also true
Any individual that starts a saving goal should start small, for example: “I’d like to have $300 saved up by the end of the month.” A bad example: “I’d like to have $5,000,000 saved up for when I retire. That’s not a goal, that’s a death sentence.
If you’re interested in starting early, check this link out for a great strategy that can be followed with any income level: http://www.stretcher.com/stories/00/000612m.cfm