Find the Money

When creating your budget, start with the actual amounts you currently spend.  There are many tools out there to help you complete your budget.  Intuit’s Quicken software is an excellent choice, as is Microsoft’s Money software.  It really doesn’t matter how you do it.  The key is you have to know first where your money is going before your financial success system can be developed.  For an easy to use browser-based budget calculator, click here.

Now that you have your budget in place and you know where the money is going, it’s time to identify areas that can be trimmed a little.  One approach might be to generate 3 potential budgets – (1) a slightly trimmed budget, (2) a moderately trimmed budget, and (3) a severely trimmed budget.  The leftover cash from each of these versus your actual budget will be used in Step 3 below.  Examples of potential budget adjustments might be eating out for lunch 2 times per week instead of every day, or carpooling to work more often.

Once you have generated several potential budgets with the associated savings of each, we can now calculate what this savings means in future dollars.  THIS CAN BE AN EYE-OPENING EXPERIENCE!!!

In order to run the necessary calculations, we need a future worth calculator, such as the one provided here.  We will then take the monthly savings we calculated in Step 2 for each potential budget and plug those into the future worth calculator in order to calculate what those savings could be worth at retirement.  The numbers may scare you and, hopefully, get you to take action with the remaining steps of the financial success system immediately!

As an example of the power of compound interest, let’s say you have just entered the work force out of college, and you decide to eat out with your colleagues from work every day for lunch at an average of $13 per meal.  After your first year of work, you decide to only eat out 2 times per week for lunch.  Assuming the lunch you bring from home the other 3 days costs you about $2 per meal, you would save $33 per week, or about $132 per month.  If you are now 23 years old and decide to invest that $132 per month at a 10% annual return (long-term stock market average) until you retire at 65 years old, how much money will this become by the time you retire?  Surprise....OVER A MILLION DOLLARS!!!  Click here to see the calculation for yourself.  Compound interest is a miracle from above that allows your financial success system to work by only making small adjustments to your spending habits!

Step 3 above should INSPIRE YOU TO TAKE ACTION NOW!!!  If so, click on the link below to continue to the next step of the financial success system.  If not, this website will probably be of no further use to you.  Best of luck!