The biggest mistake you can make in business or not, when it comes to finances, is to find excuses to use your money! To counter this behavior, place at least 25% of all cash earned (before bills are paid) into a savings account that is hard to access. No debit card, no ability to transfer cash into other accounts – make this savings account almost impossible to get to and even more expensive to withdraw from.
After your bills are paid, put another 2% of your “spending” cash into this account. This is the best thing you can do to prevent yourself from making the worst money mistake known to mankind.
Example: Let’s say you personally draw a salary of $4,000.00 a month. After taxes and healthcare, in a decent world, you are bringing in $3,600.00 a month. $972.00 (27%) of this month HAS to go into that hard to reach savings account. I know what you’re thinking, that leaves you with $2,628.00 to live on for the month. Well, people have lived on less and made. You are going to have to downsize in many areas if you think this is impossible, but you can do it!
Here’s the benefits. If you stick with the 27% rule (not including small percentages of interest earned) you will have over $11k in the bank at the end of a year. Do this starting at age 30, you’ll have $352k in cold hard cash sitting in your bank at age 62- that’s pending you don’t ever get an increase in income. Plus, while saving, you have some “safe” money incase all hell breaks loose and you have to dip into your secret saving account.
Let’s talk business profit. After employees are paid, insurance covered, bills deducted, etc.- your company makes an average of $12k in profit per month. Before putting money aside to reinvest in yourself, put 27% of that money into a business saving’s account. Over the course of a year, your company will have $38k in savings alone. That’s $380k over the course of ten years!
My point is to make adjustments to your lifestyle and prioritize your spending and saving habits. While the concept is elementary, not saving enough money continues to be today’s number one money mistake amongst workers and business owners alike!
Until next time,
Twyla N. Garrett