Saving for something big (home deposit, car, holiday?) The Richest Man in Babylon by George S. Clason (read it!!) has the best advice:

A part of all I earn is mine to keep.[1] If you saved 10% of all you earned, how much would you have in 10 years? (one year’s income + interest!)

Putting this into practice

1. Set up a high interest saver account (e.g. ING, Bankwest) – or set up a managed fund (I did this with MLC for a few years)

2. Set up an automatic transfer of 10% (minimum 10% – more if you can afford it) every time you get paid (once a month, every fortnight, etc.)

Or – if you have varying income – transfer 10% each time you get paid – before paying anything else (see why below).

 

The most important part of this set up is it is automatic. If it isn’t automatic you will find something else that you need to pay.

The second important part is it should be first when you get paid. Otherwise you will pay your bills and have nothing left! Pay Yourself First

Do it NO MATTER how much you earn. (or Save small, save often). With a paper run I started saving $10 a week.

And lastly – DON’T TOUCH THE SAVINGS –

In 5 years a car/computer/ipod will be worth a lot less than you paid[2] and a holiday will be memories and photos on facebook.[3] However if the savings go towards a home deposit – the house should be worth more than you paid for it (then you could always sell it and go on that amazing holiday you wanted).

This one little trick is the start to wealth – Do it exactly as described here!

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[1] Isn’t everything I earn mine to keep?  No!! – you have to pay money to live and get things your want   He means your to keep for years (not for 1 week before you spent it).

[2] Don’t get me wrong – A car should be a goal as well – maybe a separate 10% should go to the car? Also you might want to get something that is practical (read: cheap or old) rather than something that looks good

[3] I do love travelling too – I spent 5 weeks in Europe & Greek Islands and it was an amazing experience.

Tags: deposit, financial success, money, pay yourself first, riches, save for a house, saving

This entry was posted on Tuesday, September 29th, 2009 at 12:49 pm and is filed under Saving Money. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.