A man lowkey trying to build my finances any tips
As others have said, "spend less, save more". Of course, this doesn't really do much for motivation. One of the most valuable exercises a person can do is run the calculations to fully understand their financial situation, and get an idea of how aggressive they need to be at this, and what the consequences will be of not meeting their goals.
Everyone should really be conservatively estimating how much monthly income they need to live past a retirement age, their longest estimate on expected life span, and therefore the amount of savings needed at a particular point in time, assuming a worst case low-risk return.
Some simple, exercises:
- How much have you saved now, and how long would this last if you stopped working today?
- At your current savings rate, how much will you have saved at your estimated retirement date? How long will it last?
- How much do you have to increase your earnings, to increase your savings, in order to meet your retirement goal?
- How much can you reduce your post-retirement income to, to get by?
- If you had to stop working right now, how long could you support your lifestyle? How long could you support your most downsized lifestyle?
It's bizarre, but I have suggested the above to a friend, and it turned out that he (at 41 years old) had never considered that at some point he wouldn't be able to work, and was pretty much assuming that no savings beyond what his company was taking out of his paycheck for pension would be sufficient (definitely is not).
I also have at least one friend (42 years old), who has almost no savings (does have house equity though), who had been expecting that his income would take off at some point, and savings would become inevitable at that point. He is already earning over R1m+, and doesn't save a cent, so I don't really know at which point he expects this to kick in.
In both of the above scenarios, I realized that they have a tendency to believe that they are effectively immortal (or at least believed they could do their jobs until both they and their wive's dropped) and that their means of income is perpetually safe. They are quite calm, going to nice restaurants, and going on on nice holidays, despite being no more than three paychecks from having to sell their property on a fire sale just to put food on the table. It's this false sense of invulnerability that has put them in a precarious situation, and all it will take is one serious illness or a sudden shift in their respective industries to halt their lifestyles in their tracks.
Anyway, suggesting the above calculations did help them somewhat. One accused me of trying to make them "panic" -
some panic is not a bad thing if it can pop that bubble.
