We all need to start from somewhere, right?
Do you remember that New Year's Resolution you gave yourself to go get active and hit the gym? Now remember how hard those first two weeks were to consistently go to the gym?
All habits are formed within a couple or more weeks of consistent routine. Now what I'm about to share with you has to do with your financial health. And guess what? It's easy to maintain, and its realistic. Let me explain.
Just like going to the gym 3-5 times a week after several weeks, it becomes a habit and a part of your lifestyle. What I've been doing personally for a number of years has been to pay my future self first every week. How?
As a millennial, I've grown up with technology all my life. Since I was 16, online banking was available to me, so it's been really easy for me to set up an automatic savings plan for myself. What I've done differently in the past years, however, was change that automatic savings plan into an automatic investing plan.
Each Wednesday, I would allocate $70 to my savings account. Before you know it, my tiny $70 weekly contribution to my savings account became a massive cash cow and needed to be invested. So I did that. For my first two years, my savings account had $7,200 in cash that I saved until I could legally invest. And when that day in June arrived, I transferred all the funds to my investment account and bought some stocks. I continued to invest this $70 per week into the account, and it has grown since then.
Check out the way our dollar bills can grow at 9% annual returns, investing $70 every week for 52 weeks:
The result? $70 a week turns into $3,600 in your savings account over a year. And if you invest it instead? You could potentially grow it at 9% and turn it into $3,800! That's one way your money can work hard for you.
But in order for you to do this, you need to be greedy and pay your future self first. Your pay is biweekly? No problem: pay your future self $140 each pay cheque. Twice a month? $150 per paycheque. The point is: be greedy and make it a priority.
Now, you may be thinking: "Ary, this is too much for me to save each week! I got rent and bills to pay!" To that, I say true. But when you think about it, that's actually just $10 per day you are already spending on coffees, dining out, seeing a movie once in a while, etc. Can you give up your $6 Starbucks Pumpkin Spice Latte for the day (sorry I don't know many of the drinks at Starbucks, haha) or your $30 meal and $8 glass of wine for the dinner out on Friday? Can you work one more hour per day, even at minimum wage ($11.40 in Ontario), to make that extra $10?
Now, don't get me wrong: spend and treat yourself to enjoy your life! But be aware that "little" expenses do add up! So track what and how you are spending your earnings periodically. But that's a post for another time.
With that said, it's true that many of us know how to spend our money, but don't know how to save and invest it. Let's start a new habit in our lives and fund the future you with a nest egg of investments to pave your path to financial freedom. It just takes $10 a day to start.