Save Like a Pro – Pretend You’re a Business
THIS is one of the best bits of advice I was given when I started my journey to financial freedom.
In simple terms, you run your life as if you were running a business.
Let’s call the company Future You Inc.
You are the only employee but you’re also the CEO and owner. So the only person who will profit from this lucrative money-making enterprise is you.
Sounds good, right?
Now let’s get down to business
First thing we have to do is look at the books.
What’s the cashflow like? Is there enough money coming in to pay the bills?
What about income? (Is there any way to increase your take-home pay?)
Getting a wage rise might seem difficult but your day job is not the only way to earn a bit of extra cash. Think about developing an extra income stream.
The easiest thing every successful business owner does is cut costs.
If expenditure is slashed it will maximise profits.
So examine every area of your life. List what you spend and what you spend it on.
It’s best to start with your biggest cash drains so you can get an overview of your situation. Then you can drill down into the detail for the complete picture.
For example, look at the areas below in bold and then focus on the sub-headings.
Some of the high figures could well surprise you and will motivate you to cut spending.
Just by doing this I saved hundreds a month in the following areas:
FOOD: Shopped smarter to buy cheaper equivalent products, and cut down on coffee shop visits. Saved £30
HOME: Switched mortgage and insurance companies. Saved £50
UTILITIES: Got a better fixed-rate energy deal. Ditched satellite TV and mobile contract. Saved £70
CAR: Sourced cheapest petrol in area. Haggled for better insurance deal. Saved £20
PERSONAL: Ditched designer labels. Found cheap flights. Saved £30
MONTHLY SAVING: £200
And that’s just the big stuff.
It was a bit of an eye-opener for me when I realised I’d just saved £2,400 every year for very little work.
Putting that kind of cash back into my pocket was like a wage rise. It would add £24,000 in pure cash terms to my bank account every decade.
Put the money to work
Now that Future You Inc has more income coming in, it’s time to invest to improve your business.
If you put the money saved into cheap, index-linked global stockmarket funds, then over the long term you’ll soon have a hefty cash pile.
Keep adding to the investments and, as the years roll by, your wealth will grow. Amazingly, thanks to the power of compounding, the money will start growing by itself.
Say you invest £2,400 every year and you get a 5% return every year.
After 10 years you’ll have £34,000.
After 20 years you’ll have an incredible £85,000.
That’s not a bad reward for a bit of cost cutting.
And remember, like any good business owner, ALWAYS REMEMBER TO PAY YOURSELF FIRST.
Make sure the savings you make and money for your nest egg is set aside at the start of every month. That way you can invest it and aren’t tempted to spend it.
Trust me, working for Future You Inc will be the best job you ever have!