Little amounts can make a large difference to your finances.
As gasoline and food prices continue to rise, the squeeze to make family budgets balance each month becomes more of a struggle. After the big savings have been found and taken, smaller savings have to be found to make ends meet.
This can be frustrating as it can feel like everyone is being nickled and dimed to death. That's why it's important to realize how these small amounts can make a huge difference in your overall financial health.
You've likely heard about the little ways to save money a million times. Money-saving advice includes standards like packing your lunch instead of buying it at work, skipping the Starbucks and making your coffee at home and watching videos at home instead of going out to the movies. While you may have grown tired of hearing them, they are still as true as ever and even more important when the economy is struggling.
Saving small amounts of money is good advice for everyone, it's not as essential for people that are currently living well below their means. If you spend $5 on a cup of coffee each day, but you're still able to put away five times that amount toward your savings, that coffee splurge isn't going to hurt as much as for someone who isn't saving anything. For those that are barely making ends meet, spending small amounts of money can be the difference between deep debt and a nice retirement account.
When you are faced with a budget that isn't balancing, you have two main choices: earn more money or cut more expenses. Unfortunately, many turn to a third alternative. When they can't seem to make their budget balance, they decide that it's acceptable to place the difference onto a credit card. Even though the monthly shortfall in the budget is small, placing it onto credit cards is one of the worst financial moves that a person can make. The result will be a downward cycle that will not only keep you in debt, but also create a tremendous amount of stress.
There is often a false assumption that saving $10 and spending $10, although opposite, are relatively the same. For example, if a person saves $10 a day, after a month their account will have $300 while if a person spends $10 a day, that will result in a debt of $300. While on the surface this makes perfect sense, the problem lies in that these numbers fail to take into account the interest that can be gained or charged on this money. It is this failure to understand the concept of compound interest and the dramatic effect it can have that greatly changes these results.
It's important to understand that it takes very little to start sinking into debt. For most people, spending $10 a day would not be considered extravagant spending by any means, but $10 can result in tens of thousands of dollar of debt. It's simple to see when you compare the results of what happens when one person saves $10 a day while the other spends $10 a day that he doesn't have.
If a person were to save $300 a month (approx. $10 a day) and invest it to get a 5% yearly return, that person would have $20,402 in the bank after five years. On the other hand, if a person ends up spending $300 a month more than he has and puts it onto a credit card that he doesn't pay off over the same 5 year period, that person will owe $36,259, assuming a 26% credit card interest rate. After five years, the difference between saving $10 and spending $10 each day results in a $56,661 gap in net worth between the two.
Add another five years to the same patterns, and the results are even more dramatic. After 10 years, the person who saved $10 a day would have $46,585 in the bank, whereas the person whop spent the $10 he didn't have would be $167,470 in debt, resulting in a net worth difference of over $210,000.
Of course, there are many other factors that could alter these calculations. The interest you can earn and what your credit card interest rates are will vary from this example. There is a minimum amount that the person would need to pay on a credit card each month. If debt to this extent began to occur, the person would have their credit cut off long before this amount accumulated and would likely need to declare bankruptcy. The point is that over time, small amounts added to debt can result in far more debt than most people realize.
Once you learn that saving a small amount and overspending a small amount aren't simple opposites, you understand the importance of having a budget and strictly sticking with it. If you are able to fight through the hard times and keep your budget balanced, then you set yourself to reap great financial rewards when the economy finally turns around.
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This is strange...can you figure it out? Are you the 2% or 98% of the population?
Do the following exercise, guaranteed to raise an eyebrow. There's no trick or surprise.
Just follow these instructions, and answer the questions one at a time and as quickly as you can!
Again, as quickly as you can but don't advance until you've done each of them.
Now, scroll down (but not too fast, you might miss something)
2) Multiply that number by 9
3) If the number is a 2-digit number, add the digits together
4) Now subtract 5
5) Determine which letter in the alphabet corresponds to the number you ended up with(example: 1=a, 2=b, 3=c,etc.)
6) Think of a country that starts with that letter.
7) Remember the last letter of the name of that country.
8) Think of the name of an animal that starts with that letter.
9) Remember the last letter in the name of that animal.
10) Think of the name of a fruit that starts with that letter.
Now, go to the comment section to reveal the answer. I will continue my post at there ;)
Let me ask you a few questions
While you are walking in the street and you saw a $100 note on the floor will you pick it up?
Next if the $100 note had been crumpled as if a person crumpling a rough paper and throw it to the rubbish bin. Will you still pick it up?
Worst still, if the crumpled $100 note had been step by a foot as if a person to pull off a cigarate. Will you still want pick it up?
Well, I’m not sure about you, but I’m definitely picking it up because I know that $100 note still have a value of $100 regardless of its condition.
If we turn the situation around whereby the $100 note is merely a blank piece of paper? Will you still pick it up? I bet NO! Why? Simply because it's full with wrinkles, dirty and worthless.
Now what is the catch here? If you notice carefully, there’s a common characteristic between these two items, i.e. both are made of paper!
This same goes to us, most individual are given the same set of biological hardware (brain, 5 senses, hands, legs n etc) but we are “valued” very differently in different aspect. Most often at the end of the day we are value by a price tag.
Why creating values within ourselves is important? One of the crucial reason is we are living a competitive society that will keep on evolving from time to time. Let me give u a metaphor.
In the following years, these are the popular medium used for music/video industry.
1900 – Gramophone Records
1963 – Cassette Tapes
1983 – Compact Disc, CD
1992 – Mini Disc
1996 – DVD
Present – Blue Ray Disc/ HD-DVD
Notice that each time a new technology is created, it would required lesser time than the previous and the earlier technology will start to obsolete. This same goes to some career that exist in the past that didn’t exist anymore now! So don’t be surprise that the job/expertise/career that we have presently will obsolete in future!
So how do we increase our values? Let me ask you the following.
When is the last time you read a book, newspaper, magazine n etc?
When is the last time you ever attend a course, training n etc?
When is the last time you ever go out and network with different group of ppl?
When is the last time that you dare to do things differently from what you used to do?
Even you are a $100 note now, your value will slowly depreciate as time goes on. The next generations will be more aggressive and willing to work twice harder just to get half of you what you get.
Lastly, the $100 note is merely a blank piece of paper but after being imprint, it make so much difference in values. So you still in a position to imprint yourself to make a difference in your life.
"Live Life to the Fullest" - Ernest HemingwayCheers!!!
