How to Save Money for Stock Investments:  Retirement Savings 101

Saving money is one of the oldest economic habits that exist upon the earth.  It is the ploughing and storing away of excess income for retrieval at a later time.  The future planning routine will assure that the saver is protected or shielded from financial mishaps.  This  is also true when you need to save stock investing funds for future deployment.

Saving money may not be the only method, but will go a long way to boost your confidence in the event of a personal financial crisis.  There is a saving to invest mindset, and then a saving for raining day mentality also.  The latter is used for emergencies, but the former is an instrument for growing wealth.

Here are money saving tips that will guide you into building your investment nest egg.  Get a stable hoard also stashed for emergencies by copying these tricks.

Give away the first 10% of your income

This idea from the onset may not sound that appealing.  Giving away the first 10 percent of your income is known as tithing to many Christian and religious faith.  The act of giving in itself – if it is done as a kind gesture of charity to humanity fosters an invisible power within the giver to attract even more wealth.  He becomes a trusted custodian of wealth and money, rather than a mere consumer of it.

You might agree that this tenet is more of a meta-physical idea than a factual financial or mathematical rule.  The idea of getting as you give is no different from the law of sowing and reaping.  And for the scope of this book, let’s just place it as one of the many universal mysteries that work for everyone who uses it, even if we don’t understand the full parameters of its legitimacy.

Pay yourself the next 10% of your income

Have you ever heard the expression, “Pay yourself first?” A truthful and grand idea it is!  The better path of success is actually to pay yourself a tenth of all your income right after giving the initial 10% to the right charity or cause.

What does paying yourself 10% really mean? Who owns the remaining portion of your income? Ironically, the other portion of your income constitutes the expenses of life.  It’s not your money.  We all have to pay for our basic needs.  These include: food, shelter, clothing, bills, transportation, medical, dental, etc.  Most importantly save stock investing money aside for financial freedom.

As you pay yourself 10% or more regularly, you begin to build real wealth.  Every other thing you have such as a car, furniture, phone, clothes, etc may serve their worthy purpose but will never pay you a dividend or income.  They will continue to depreciate in value and cost you further in maintenance and replacement.   As you save stock investing money and learn to invest it systematically, you will receive returns in the form of interests, dividends, and capital gains.

Create a monthly budget to allocate your after tax income.  With the 50-30-20 Budget Rule for example, you have three (3)  general categories namely: Needs, Wants, and Savings.  You 10% monthly extract will come from the savings section of the budget.  Use this to invest.

Creative ways to get money out of thin air

I know what you are thinking.  Yes it is pretty hard enough to live on one’s current income.  Let alone squeezing more savings after the primary deduction of 20% we talked about above.  Giving the first 10% away and putting the second 10% into a savings program (or investment fund) won’t give you room to conjure any more money for safe keeping – away from everyday expenses.

The very excellent way to maximize savings is to prudently develop more creative avenues of squeezing money out of a rock by applying artificial scarcity.  Here are three excellent examples below:

1. Aspire to save an extra $1 a day (or a given unit of your local currency). Let’s pretend for a minute that it’s a life toll you have to pay daily, as important as food and water or breathing.
2. Aspire to save another 10% of your most important urgent expense or pending financial obligations. Let’s assume that you cannot help it if your favorite treat now costs 5% more than it did yesterday.  You would still pay anyway without question or argument.  Make that artificial scarcity assumption that something has gone up by 5%.  Immediately extract that 5% amount and deposit it into your savings before you begin to miss it.
3. I don’t care if you have to rob yourself with a gun. Sacrifice a latte or two.  Do something creative on a regular basis.  You will thank your rich and happy self 30 years from now.  I’m also hoping you’ll share this article and recommend it to others who may be doing the exact opposite.

Try the above mentioned artificial scarcity strategies rigorously and religiously.  While you discover for yourself other ways to extract more savings, seek to increase the rates of these savings slowly above $1 a day to $5 a day; or from 10% to 15% etc.  The above Financial Independence key will endow you with an unbreakable mental attitude that is conducive in attracting more money easily into your life.

Save and plan for all of life’s necessities

Plan in advance before making all major purchases.  Put aside money as savings to buy needful items for your regular use, as well as your medium to long term needs.  A lot of people today struggle to pay for their rent, school tuition, health needs etc.

Remember that above the 20% savings one needs to put aside, there ought to be additional savings goal amounts.  This is not difficult to do.  Follow these few steps below to get a fair idea on how to proceed to strengthen yourself and shield your family from the costs of living.

1. Just figure out what you need (eg. A College Degree for yourself or child)
2. Calculate the estimated total cost. (Remember to include all related expenses such as books, meals, transportation; even the opportunity cost of forgoing a full-time income job, inflation rates, etc)
3. Decide or estimate when these future payments would be due.
4. Count the number of months, weeks, or even years till the due dates.
5. Determine how much money is needed per month, week, or day as periodic payments that may be kept in a short to medium term interest bearing account for investment.
6. Consider how much could be borrowed from family or friends without paying any interest.
7. Consider also if a loan is needed and at what terms and interest rates it will cost.

The following payment system can be applied to any number of future expenses or financial obligations.  But try to avoid debt at all times unless it’s for an essential life goal such as Education or Housing.  Save a percentage of income for this purpose such as 25% extra above the 20%.  Many people also save a lump sum such as $100 per month rather than a percentage – depending on each person’s preference or circumstance.

Create a rainy day fund

What is a rainy day fund?  You can call it an emergency fund if you like.  This is another indispensable tool in your Financial Freedom plan.  The world as we know has so many unforeseen economic calamities lurking in the horizon.  (Recessions, Pandemics, High Unemployment?  You name them.)

This brings about frequent financial distress to individuals and nations alike.  Do you remember the late 2008 credit crunch? Or the more recent corona virus pandemic?  To protect yourself and your family or small business, do the following quickly.

These steps below ensure that you are not torn apart by financial distress in the event of a job loss, pay cut, redundancy and corporate layoff, terminal illness or an accident.  This does not mean you will find full relief from your money woes, but its a good safety net that will go a long way to cushion you for a limited time until you get back on your feet again.

1. Calculate how much living expenses you’ll need to survive on for 3 to 6 months if your current income was taken away. (3 months is the minimum, although 6 months of your living expenses is the recommended reserve.)
2. Save an additional 5% or 10% more of your income into a new medium-term or long-term investment fund or account each month till you reach your safety-net cash reserve goal.

Sage Tip:  When should you start an emergency fund?

In Conclusion

In the beginning it may be hard to live within your means. But the joy of saving money comes at the end of compounding.  The zeal to save stock investing cash will build a money management discipline that will aid you in the accumulation of financial assets.

Share in the comments below how your own savings ritual has paid off for you over the years.  Did you apply the habit to both the accumulation of investments and emergencies?

In Summary:

1. Give away the first 10% of your income
2. Pay yourself the next 10% of your income
3. Creative ways to get money out of thin air
4. Save and plan for all of life’s necessities
5. Create a rainy day fund

Further Reading: Check out our book recommendations on this topic from our Resources Page.

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