WOULD $27.40 A DAY CHANGE YOUR LIFE?
Before we get stuck into today’s Money in Minutes, a quick high five to the Reserve Bank who finally lowered the official cash rate last Tuesday. Your lender will communicate what this means for you and your loan, and please ensure that you understand as to whether your repayments will automatically reduce, or whether that is something you need to request (if you want such), as not every lender will automatically make the change.
So, if you have a home loan on a variable interest rate, you have savings on the way…
Remember, the financial decisions you make each day will determine what your lifestyle looks like decades from now.
At some stage you will need to bite the bullet and start getting your financial house sorted, and there’s no better time than now. And the key to success is in managing the money you earn. In fact, it’s the number one determinant of how financially successful you will be.
If you cannot save and invest, or save and pay down extra debt, your financial life becomes a lot harder, and this flows through into everyday life. Money is the number one cause of stress, and we don’t want you having any of those symptoms.
So, you’re probably wondering what’s with the $27.40 a day? Well, this figure multiplied by 365 days in a year equates to $10,000! Most of us would probably agree that $27.40 each day doesn’t sound like that much, but $10,000 over a year certainly is.
What if you could find ways to save $27.40 a day. What could these savings do for you each year? What would these savings do for your financial future and your future lifestyle? It would certainly be a much more pleasant conversation with your future self.
You have probably heard us going on and on about small steps equating to large results. Well thanks to compound interest, Einstein’s 8th wonder of the world, we can fill you in on where these small steps are likely to lead you.
Check out the numbers…
$27.40 saved each day for a period of ten years adds up to approximately $142,000
$27.40 saved each day for a period of twenty years adds up to approximately $428,000
$27.40 saved each day for a period of thirty years adds up to approximately $1,000,000!
For transparency, these numbers are modelled on investing your money into growth assets using a diversified managed fund that achieves a 7% return. There’s nothing complex going on here, it’s not Bitcoin, it’s not an overly-complicated hedge fund, it is simply the power of regular saving and investing into sensible growth assets, that compound and grow your money over many years. (Hint: This is basically what your super fund does for you automatically… because it works!)
If you have time and can take action NOW, then there’s nothing stopping you replicating these financial outcomes. Time and action are the key ingredients.
There are many ways you can achieve a savings rate of $27.40 per day. Our preferred method is to simply pay yourself first, meaning that come pay day each fortnight or month, the equivalent of $27.40 goes out of your bank account and into your savings account or directly into the investment (or possibly your superannuation). This might mean a few less pleasures to begin with as you have less disposable money, but you work it out. It’s funny how we are poor at getting started, but once pushed, we almost always work it out.
There are plenty of other strategies you can use to boost your savings to $27.40 per day. The Wages to Wealth program is available and chock full of value, from helping you sort out your spending plan, to setting goals, automating paying yourself first, cost hacking to free up more money, and much more.
We also need to be realistic as not everyone can immediately do as we encourage you to do. If you know your budget is tight, please don’t go paying yourself first and missing the rent or mortgage repayments. Take your time to plan and get organised.
As mentioned, the two ingredients needed here are time and action. There’s nothing stopping you starting with 10% of this savings rate, being $2.74 per day (that’s $1,000 per year). That’s less than a coffee per day, and over time you can slowly but surely increase your savings rate. You’ve got time and you’re taking action.
If you can achieve this feat, you could soon have a fully stocked rainy-day fund, perhaps a travel fund, extra repayments being made on your mortgage and some salary sacrifice into super to build long-term wealth whilst saving tax. Your options are endless, and this is all about you and your life!
Cheers,
Dan and Dave
