It’s been a few weeks, and you still have not won the lottery. You keep checking the bills, thinking, Oh, it’ll eventually come to check, checking, and paying, but it just never seems to happen. Do you think Dave Ramsey has ever won the lottery?
I think so! He didn’t spend $5,000 of other people’s money to buy a million-dollar lottery ticket. He did this by spending over $1,900 of his own money. After he was done, he wasScorefulownerof a million bucks. What did he have to show for it besides a million bucks?
What about the odds
According to the National Center for Statistics in the U.S., the odds of winning that jackpot lottery are 1 in 450 million. You’re not going to get lucky if you spend all of your money on lottery tickets. So what went wrong?
If you’re like many young people nowadays, your debt probably started long before you ever won a jackpot.
Whether you know it or not, each day you spend more money than you make. I’ll share one of my challenges with my kids when it comes to grocery shopping, not your fault, but there are several ways it can happen.
It’s hard to keep up with the neighbor down the street when we have brand new trucks and sports cars in the driveway and plenty of new clothes in our closets. If you buy more of everything, for clothes, food, and clothing, you just end up spending more. You’ll agree on it yourself, it’s easy to get into trouble when you spend money too much.
The importance of budget
Do you have a budget? If not, start one. A budget shows you where your money is going. It pays for all those things that you didn’t know about and have a monthly budget is an excellent way to track your money and know how much money you have and where it’s going.
Many families know how much money they have, and some know how much they spend, but no one knows about their net worth.
Your net worth is your total assets minus your total liabilities. Your financial net worth may vary daily based on the value of your assets and liabilities. For the next 30 days, you need to track your net worth to learn how to build your financial net worth.
So how can an average young couple build their financial net worth?
A young couple starting today with $500 a month in combined salary and social security payments should try to save, slowly. Generally, a good rule of thumb is to save at least three and one-half times income. For example, a young educated couple with young children will save 10 times annual salary. On the other hand, a young couple with a low annual salary should save 1.5 times their salary.
You must be open to new information
You may not be saving three and a half times your annual salary right now, and sometimes spending $25 per day doesn’t seem to be that expensive. My advice is to save slowly, yes. But save constantly, yes. Making and saving money isn’t hard if you can balance your money and have a budget.
Taxes are another reason to save over 3 times your annual salary. When you’re young, taxes can make your financial life sick. Be aware of your tax situation.
Do you itemize your taxes
If not, join a group to itemize your taxes. Just taking your pay stub will help you lower non-Itemized deductible items to the number of your allowable deductions.
Taxes must be paid, so be aware of when and how much you have to pay. An easy way to remember your due dates and to deduct your dues is to write them down on your pays stub. Itemize your taxes, and you’ll never forget the due date and how much you have to pay.
If you are not itemizing your taxes, you have less to worry about, but don’t become complacent. Illegal aliens can come before you write your final monthly check on the next payday, and you may have already missed the deadline, only to have that deducted from your bank account.
Monitor your taxes monthly. Check to make sure there are no unpaid taxes, outstanding tax liabilities, or credits outstanding. It may be difficult to grab a pen and paper and write out your due date on your pays sheet, but you must do everything in your power to make sure your taxes are paid on time.
Know compound interest and its power. You invested in your 401K. Many companies are reliable and let you reclaim your investment within a year. In 13 years, investment by the time you get it back will be double the original.
Check my other great posts on my blog: