Estimated reading time: 9 minutes
As a young entrepreneur, you’re likely laser-focused on growing your business and increasing your income. But have you considered the power of saving money? I’m Daniel G. Taylor, CEO of Mayer Marketing Agency, and I mentor young male entrepreneurs. Today, I’m sharing my ultimate guide to money saving, tailored specifically for ambitious go-getters like you.
Let’s get one thing straight: saving isn’t just about being frugal or cutting costs. It’s about creating a solid foundation for prosperity and abundance. It’s about giving yourself options and the freedom to take calculated risks. So, let’s dive into how you can master the art of saving while building your empire.
Table of contents
- Key Takeaways:
- Why Does Saving Matter for Entrepreneurs?
- Step 1: Understand Your Cash Flow
- Step 2: Create a Smart Budget
- Step 3: Set Saving Goals
- Step 4: Automate Your Savings
- Step 5: Create a ‘Future Budget’
- Step 6: Align Saving with Your Life Goals
- Step 7: Increase Your Savings Rate
- Step 8: Invest Wisely
- Step 9: Boost Your Income
- Step 10: Review and Adjust
- Conclusion
- Action Steps
- Frequently Asked Questions (FAQs)
Key Takeaways:
- Focus on increasing income and smart saving, not just cutting costs
- Create a budget based on your pay cycle
- Use a ‘future budget’ to plan for your coming wealth
- Aim to save at least 20% of your income
- Set specific savings goals, starting with an emergency fund
Why Does Saving Matter for Entrepreneurs?
You might wonder, “Why should I focus on saving when I could reinvest everything into my business?” It’s a valid question, and here’s the truth: saving money gives you choices. Savings provides a safety net, allowing you to take calculated risks in your business. It’s not about pinching pennies – it’s about building a foundation for growth and giving yourself the freedom to seize opportunities when they arise.
Step 1: Understand Your Cash Flow
The first step in any successful money-saving journey is getting crystal clear on your current financial situation. You need to know exactly where your money is coming from and where it’s going. Where you place your attention is what grows. Starting today, track every single dollar and that comes in and goes out of your accounts.
To make this process easier, I’ve created a spreadsheet that you can download and use. It’s designed to help you categorize your income and expenses, giving you a bird’s-eye view of your financial landscape. Remember, knowledge is power, and understanding your cash flow is the first step towards mastering your finances.
Step 2: Create a Smart Budget
Now that you have a clear picture of your finances, it’s time to create a budget. But here’s the key: base your budget on your pay cycle. If you’re paid monthly, make a monthly budget. If you’re paid weekly, make a weekly budget. This approach aligns your financial planning with your actual cash flow, making it much easier to stick to your budget.
I’ve created another spreadsheet for budgeting that you can download. Use this to allocate your income to different categories, including savings. Remember, a budget isn’t a constraint – it’s a plan for using your money effectively. It’s a tool that puts you in control of your finances, rather than letting your finances control you.
Step 3: Set Saving Goals
Setting clear, specific saving goals is crucial. Start with an emergency fund. Aim for $2,000 for each person (and pet) in your life. This might seem like a lot, but having this buffer can save you from financial stress when unexpected expenses pop up. And you do want to be able to support your loved ones, don’t you?
Once you’ve built your initial emergency fund, work towards saving six months of living expenses. This gives you an even bigger safety net and the freedom to take bigger risks in your business. You can save fast — even on a low income.
After you’ve reached these milestones, you’re ready to think about investing. But we’ll get to that later.
Step 4: Automate Your Savings
Here’s a trick I use: I have an account where I can deposit as much as I want, but I need to give 90 days’ notice to withdraw. This account pays higher interest than a regular savings account, and the withdrawal restriction helps me overcome impulse buys.
Find a similar option that works for you. The key is to make saving automatic and difficult to undo. Set up automatic transfers from your checking account to your savings account right after you get paid. This way, you’re paying yourself first, before you have a chance to spend that money elsewhere.
Step 5: Create a ‘Future Budget’
This idea comes from Bob Proctor’s book You Were Born Rich, and he got the idea from The Science of Getting Rich by Wallace Wattles. The concept is simple but powerful: create a budget for your future wealthy self.
How will you use your millions when you have them? Will you invest in real estate? Start a philanthropic foundation? Travel the world? This exercise isn’t just fun – it’s a powerful way to attract money by giving it a purpose. Especially when you combine your budget with images on a vision board. When you have a clear vision of how you’ll use wealth, you’re more likely to take the actions necessary to create that wealth.
Step 6: Align Saving with Your Life Goals
Saving isn’t just about money. It impacts all areas of your life. Consider how saving money can help you achieve your goals in these seven areas:
- Wisdom, understanding, genius, and creativity: How could savings fund your education or give you time to pursue creative projects?
- Business momentum, achievement, fair and sustainable transaction, service: How could a financial cushion allow you to take bigger risks in your business?
- Wellness, vitality, beauty, and fitness: How could savings allow you to invest in your health and wellbeing?
- Love, intimacy, caring communication, family dynamics: How could financial stability improve your relationships?
- Social influence, leadership, and legacy: How could savings allow you to make a bigger impact in your community?
- Wealth building, financial independence, and philanthropic contribution: How could consistent saving lead to long-term wealth and the ability to give back?
- Inspired mission, presence, equanimity, and enlightened awareness: How could financial freedom give you the space to focus on personal growth and spirituality?
By aligning your saving goals with your life goals, you’ll find more motivation to stick to your saving plan.
Step 7: Increase Your Savings Rate
Start by saving 1-10% of your income, plus an extra 1%. This extra 1% is your “stretch” – it pushes you just a bit out of your comfort zone. Increase the percentage you’re saving by 10% every three months.
Your ultimate goal? Save at least 20% of your income. This might sound ambitious, but many successful entrepreneurs save up to 50% of their income. Remember, as an entrepreneur, you have the unique ability to increase your income. As your business grows and your income increases, challenge yourself to save a larger percentage.
Step 8: Invest Wisely
Once you’ve built your emergency fund and have a solid savings habit, it’s time to think about investing. A simple strategy for beginners is to invest in an index fund of index funds. This provides broad market exposure with low fees.
Remember, investing is about the long game. Don’t get caught up in day-to-day market fluctuations. Instead, focus on consistent, long-term investing.
Step 9: Boost Your Income
As I mentioned earlier, saving isn’t just about cutting costs. As an entrepreneur, you have the unique ability to increase your income. Focus on growing your business and creating additional revenue streams that relate to your core business. Could you launch a new product? Expand into a new market? Raise your prices? Or could you start a side hustle that gives you a break from your day gig?
The more you earn, the more you can save without feeling deprived. Plus, the skills you develop in growing your business will serve you well in managing your personal finances.
Step 10: Review and Adjust
Your saving plan isn’t set in stone. Review your budget each pay cycle and savings plan regularly – I recommend doing this quarterly. As your income grows, increase your savings rate. Stay flexible and adjust your plan as your life and business evolve.
Conclusion
Saving money is a crucial skill for young entrepreneurs. It’s not about restriction – it’s about creating opportunities. By mastering the art of saving, you’re setting yourself up for long-term success and abundance.
If you want to save faster, make money faster.
Remember, your financial legacy starts with a single dollar saved. Your future self will thank you for the steps you take today to secure your financial future.
Action Steps
1. Download the income tracking and budgeting spreadsheets
2. Start tracking your income and expenses today
3. Create your budget based on your pay cycle
4. Set up an automated savings plan
5. Create your ‘future budget’
6. Review and adjust your plan monthly
Frequently Asked Questions (FAQs)
A money market savings account is a type of savings account that typically offers higher interest rates than traditional savings accounts. It often requires a higher minimum balance and may limit withdrawals. These accounts invest in short-term debt securities like certificates of deposit and government securities, which allows them to offer higher yields.
High-yield savings accounts and some money market accounts typically offer the highest interest rates for savings accounts. Online banks often offer better rates than traditional brick-and-mortar banks because they have lower overhead costs. However, rates can vary, so it’s worth shopping around and comparing options regularly.
Start by tracking your expenses and creating a budget. Then, set up automatic transfers to a savings account. Begin with small amounts if necessary and gradually increase your savings rate. Look for areas where you can cut unnecessary expenses, but also focus on increasing your income. Remember, saving is a habit, and like any habit, it gets easier with practice.
Yes, a money market account is a type of savings account. It often offers higher interest rates but may have more restrictions than a traditional savings account. Money market accounts may require a higher minimum balance and limit the number of transactions you can make each month. They’re a good option for funds you don’t need immediate access to, like an emergency fund.
Traditional savings accounts at large banks often offer the lowest interest rates. These accounts are easily accessible and may offer conveniences like many ATM locations, but the trade-off is typically a lower interest rate. However, they may offer other benefits like easy access to your funds and integration with your checking account.
Remember, the journey to financial success starts with a single step. Begin your savings plan today and watch your wealth grow alongside your business. As you implement these strategies, you’ll find that saving money becomes second nature, freeing up your mental energy to focus on what you do best – growing your business and making your entrepreneurial dreams a reality.
Here’s to your prosperous future! 🖖 Keep pushing forward, stay committed to your savings goals, and don’t forget to celebrate your victories along the way. You’ve got this!