This article is a continuation of previous posts on the review of a book called Achieve Financial Freedom by Sandy and Matthew Botkin.
👉16 reason people fail financially
👉Reserve
The author continues his interview with his next friend, Peter, a financial planner who own a financial literacy company that had help people to stop overspending, reduce debts and retire wealthy.
He mentioned that people should have 3 types of savings, in addition to reserve as mentioned in the last post. They are:
- Retirement savings, which should consider at least 10% of paycheck.
- Savings for unexpected large expenses such as repairs, and these can be part of the reserve account.
- Savings for expected large ticket item such as homes, kid’s education, weddings and cars.
He also had outline 5 secrets in finding the money that we need to meet these saving goals:
Secret 1: Never borrow for consumer goods like TV, refrigerator, washing machine or even a vacation. Everyone should put away a rainy day fund for such purchases and for breakdown of equipment.
Secret 2: You can have anything you want, but you can’t have everything you want. For instance, you can eat out everyday but you might not be able to have the vacation you always dream of. Or you can buy a big house but you might need to give up on the education fund. Tough choices need to be made.
Secret 3: Pay yourself first. Which means putting aside the 10% and any other money needed for future before paying any bills. Out of sight, out of mind. If you don’t see the money, you won’t spend it.
Secret 4: Learn the difference between needs and wants. Do we really need a dozen pair of shoes? That new and hi tech phone? Enough said.
Secret 5: We need to track our spending for at least 3 consecutive months. Tracking allows us to really control overspending.
After this, we will be looking at Part 2 of saving money which is saving for education fund.