Budgeting, Saving and Investing to Build Wealth

Budgeting, Saving and Investing
Budgeting, Saving and Investing
are like taking control of your health the sooner you start the better.  I am qualified to talk about budgeting because I was a successful controller and financial analyst for many years.  You might say money was my business.  Oh. I have an MBA in Finance and an MS in tax but that didnt make me good with money.  Yes, the Mrs and I have been successful savers and long term investors.
“You must gain control of your money or the lack of it will forever control you”
— Dave Ramsey

There’s a couple of truisms about money that successful savers know all too well. The first and foremost is if you are to have success building wealth your life’s financial plan must be intentional and executed over a long period of time. Decades really. While all too many people will fight it, building a budget is the first step to taking charge of your finances. The traditional budget requires you study prior spending and build your budget from there. Chances are if you are reading this you are interested in saving more and spending less. That why I suggest you adopt a zero-based budget.
Zerobased budgeting
(ZBB) is a method of budgeting in which all expenses must be justified for each new period. The process of zerobased budgeting starts from a “zero base,” and every line item is analyzed for its needs and costs.

A zero-based budget requires you justify every item you spend on. So, for example let us look at that Apple phone that is costing you over $50 a month. When comes time for renewal would a $200 Moto or similar budget phone do the job? I use my old, well off contract phone, for texts, calls, the weather and occasional directions. The basic models do all that and more. A good friend of mine purchased a few generations old Apple phone for just a few dollars. Apple and other phones have had all the key functionalities for many generations. Old ones work just fine. By the by just because a phone is off contract does not mean you need to run to the phone store for the latest model. I do expect my phones battery to “give up the ghost” eventually. I have looked up the cost and feasibility of getting a new battery and it is $49.99 installed. If you want to save money sacrifice may be the order of the day. You will hear people talk about the difference between Needs and Wants. You probably need a phone; you want the new model phone with its cool screen and the extra special gizmos, but the reality is you do not need it. I am not advocating totally denying yourself some joy, but you must be selective. In the words of Paula Pant “You can afford anything just not everything.”

Automating your Savings

“Do not save what is left after spending; instead, spend what is left after saving.”

― Warren Buffett

For me, the best way to save was to do so first. You will hear the expression ‘pay yourself first’ it means having savings taken out from your pay first and then lived off the rest. The adage “We don’t miss what We don’t see” is very true. I signed up for pretax 401k deductions many years ago and I joined my companies the stock purchase plan. $50 twice a month. Over the years I upped the percent going into my 401k plan.  When I reluctantly retired I did so very comfortably and well after I could afford to.

Invest in low cost Index funds

“The idea that a bell rings to signal when investors should get into or out of the market is simply not credible. After nearly 50 years in this business, I do not know of anybody who has done it successfully and consistently. I don’t even know anybody who knows anybody who has done it successfully and consistently.”

— John C. ‘Jack’ Bogle, Founder Vanguard Group

Unfortunately, savings is not enough, you need to do something with the money. In the beginning I bought and held individual stocks. Index funds although available since Vanguard introduced them 1976 had not yet caught on in a big way. Over time more and more of my investment are in low cost index funds. (I prefer the liquidity of ETFs) ETFS (Electronically Traded Funds) are like mutual funds but are traded in the market. In my experience they ‘are set it and forget it’ instruments for long term investing.

Play the long Game

“Successful Investing takes time, discipline, and patience. No matter how great the talent or effort, some things just take time”

― Warren Buffett

Over the course of your investing life there will be temptations to ‘chase returns’. There will be no shortage of ‘Snake Oil’ salesman dangling the carrot of quick wealth and returns. Remember: if it sounds too good to be true is almost certainly is. Run away, no fooling run no one can sell you something if you choose not to listen. Investing is one of the few things in life where boring and steady are good things.

Get off Your Butt

Finally, I leave you with a quote from Mark Twain the sooner you get on track with a zero-based budget the sooner you will get to your destination Financial Independence. Oh, and you can retire early if you so choose.

“The secret of getting ahead is getting started.”

Mark Twian

So, take control of your successful life’s plan for budgeting, saving and investing starting today! It worked for us and it certainly can work for you.

Tell me about the ways you save money.  Have I missed a great savings hack? Please share your successs and your struggles. My readers and I would love to hear them.  Please send me an Email Here.

You could also say hello and Buy me a cup of coffe

How I Learned About Personal Finance

Raymond Mills, M.B.A., M.S. has spent over 30 years of his career as a Controller and Investment Bank and Credit Card Technical Auditor.  He now spends his time writing his blog, short stories and running his boutique Microsoft Office software customization business.

You can contact Ray @ by emailing him Here or by using the contact form in the right border.

Tagged , , , . Bookmark the permalink.

Comments are closed.