Savings as Your Income Management Tool
You will get paid for your efforts of doing your job in the workplace. The income earned is going to be used for paying your daily expenses, such as housing, foods, clothes and vacations.
Before you pay all those things, are you going to pay yourself? Are you going to set aside some of your income into your savings account? If things need to be paid, why do not you pay yourself first?
Are you going to pay yourself 5% of your income or 10% or 20%? This is YOU that we are talking about here. YOU are the one who do the hard work. Do you want a satisfactory payments in your savings account?
Believe me, by paying yourself first, you will not feel poor. Someone will not be poor just by deciding to live with 80%-90% of his monthly income. Do not try to make excuses later to change your mind just to fulfill your higher standard of living.
If others are willing to eat in an ordinary restaurant, why you are so spoiled by eating in a fancy restaurant every time you feel like dining out? Before you buy some nice clothes, shoes, sandals, please double check how many of each item you already had in your wardrobe?
What I am trying to say here is, we have most of the time the tendency of buying things only because we WANT them and not because of NEED. That will hurt your savings, consider yourself lucky when you do not use your credit cards to buy the things you “Want”.
It takes a big commitment to discipline yourself in doing your income management plan, filling your savings account. It is hard to live under budget but not necessarily impossible. To convince this case, please realize how much you actually waste by reading the illustration below.
Assuming you put $5.000 per year, and you have a return of 5% annually by the end of each calendar year ( with compounded interest), you can see how much you are going to have in a 5-year period:
Year End of Year SAVINGS End of Year Savings PLUS 5% interest 1 $ 5,000.00 $ 5,000.00 2 $10,000.00 $ 10,250.00 3 $15,000.00 $ 15,762.50 4 $20,000.00 $ 21,550.63 5 $25,000.00 $ 27,628.16
Note: taxes not included.
By making a commitment of saving money per year, you can improve your savings account into $ 27,628.16 at the end of the period.
With time and compounded interest, you can save a lot more.
It is a saying: It’s not what you earn but what you keep that makes you rich
