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Budgeting and Investing for Success: 4 rules to build your wealth

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women and financial freedom

Back in 2010, I was a poor student with virtually no savings. All my savings had been quickly swallowed up by tuiton payments and I started going into debt.

When I started earning a full-time salary (which was barely over $30,000) I began saving around $100 a month.  Over the years, I learned about personal budgeting and financing and set up a strategy that paid off.  I have been able to accumulate $90,000 in savings, even though I started with a $30,000 salary. I still wish that I started saving earlier and if I had, I would have saved even more money.

I’m sharing my money saving tips here so you don’t make the same mistake I did by waiting for so long! Here are the 5 critical things to know with budgeting & investing:

1. A written budget. Because no one accidentally wins.

I taught myself how to make our own budget DIY, understand our expenses and save more money. With my first budget, I understood why I was able to save little money. I basically lived paycheck to paycheck and did not have a solid money saving strategy. The first thing that I did was write down my own budget to understand how I could save more money.

“Budgeting your money is the key to having enough”
US Senator Elizabeth Warren

Budgeting motivated me to save more money because i could see exactly how much was going in-&-out. Suddenly the frequent restaurant take-outs and shopping mall purchases didn’t look as good. I was able to save more, and pay off my debt a lot faster. This meant I no longer had to make interest payments and I could save that money for a downpayment on a condo (no more rent !) and save enough money to live a good life.

Read our simple tips to create your personal budget.

2. Automatic contributions to your savings account.

Budgeting helped me save more money. But what did I do with the extra money ? I set up automatic transfers from my checking to my savings account. You don’t have to earn a ton of money to start this ! When I began, I only transferred $100 a month.

“Do not save what is left after spending,
but spend what is left after saving
Billionnaire investor Warren Buffet

Once I studied my budget and made some changes (e.g., reduced restaurant and shopping expenses, canceled unnecessary memberships, switched insurance providers and reduced phone bill), I was able to save $500 a month and started sending this money to my savings account.

If you’re like me, it’s easy to let transferring money slip your mind. I recommend putting it on autopilot that way you never have to think about it again. This way forces me to save first, and adapt my spending to make it work.

3. Investing in the stock market is easy

According to this article from Investopedia, the S&P 500 US stock market index has delivered an average return of 10% annually since its inception. It’s a great way to grow your savings and it’s easy to get started.

I used to think saving and investing were only for the rich. Sure, I’d save money, but I was earning nothing in my savings account (hello barely more than 0% interest).  If I was feeling really lucky and adventurous then I’d invest in a short-term CD and make a few bucks however, none of these strategies was going to get me rich or even close to financially secure.

As it turns out, investing isn’t just for rich people – I can do it too, I just wish I started earlier.  

I set up a Vanguard Account Online. When I say that it’s easy to set up a Vanguard account online, I’m not exaggerating. You choose the type of account (I picked an individual taxable account), and then you provide your personal information. Next, you link your external bank account – the one you would use to fund your Vanguard account. Then you transfer your money and you are ready to invest !  I transferred a few hundred dollars and bingo – it was that easy!

I followed Warren Buffet’s advice for personal investors and for me, it worked out quite well : Warren Buffett thinks simple & popular index funds are the best way for everyday investors to grow their money. Buffett is considered one of the most successful investors in the word and you can’t really go wrong by following his advice.

Read more details on investing in the stock market by reading this story on The (mostly) Simple Life: how I saved over $90,000.

4. Have a written plan to get rid of debt.

Did you know that the average interest rate that you get charged on your debt is 14.58% for credit cards (Source: WalletHub), 4.7% to 6.2% for student loans (Source: Credible.com) and 5.3% for car loans (source : ValuePenguin)? That’s money you are handing out to the credit companies and that you should focus on paying down. When you create your first budget make sure you plan for paying down your debt. Easier said than done !

See our article : When to save and when to pay off debt.

“Debt erases freedom more surely than anyting else”
MoneyWeek Editor in chief Merryn Somerset Webb

That’s my list of the top tips that all women should know about personal finance. Let me know what you think by posting a comment!

Are you ready to proactively manage your finances? Our page on Personal Budgets is a good place to start. You can read tips to budget your money and view several household budget examples to help you get started.

Budgeting and Investing for Success: 4 rules to build your wealth

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