Note: Found this gem on Pinterest that is a concise flow chart of fundamentals
Essentially, Green shapes are good and we aim to build those accounts up. Yellow shapes are just cushion accounts and can go up and down, but we try to keep the balance somewhat stable. Orange shapes are expenditures which we’ll need to keep trimming so you can create a comfortable nest egg for yourself. This is how I currently follow my financial flow chart and it is a good representation for those who are not familiar with the framework.
Most importantly and obviously, before you can save you need to create an overview of all your expenses to find how much you’re able to put away for yourself. As a finance ninja, you’re going to learn how to trim and always be trimming your expenses while increasing your income.
Other Things you can do:
1. Pay yourself Put 15-30%(however much you can afford) of your paychecks away! If you don’t already have an emergency fund account for 6 months of total living expenses, create a separate savings account that you vow to not touch and only contribute to. For example I put 20% of my paycheck to employer’s 401k. I save the remaining either 10-15% in investments or savings(emergency fund) if needed.
2. Out of sight, out of mind You can also hide your paychecks(if they’re paper) and cash them later if this helps (hopefully you put them in a place you can remember!) OR direct deposit X% of them to another savings account you set like mentioned above that will be used only for emergency.
3. Make it work. Most important is probably retirement and savings so remember this as being (25-30% of every paycheck in the form of brokerage investments, 401k, Roth Ira). Create a percentage of amounts from your paychecks into different accounts that cover: investments, retirement accounts, savings, and emergency fund, the rest are for fixed living expenses.
4. Use cash Pull out an amount of cash every time you have a paycheck that will last you for two weeks to a month and ONLY use the cash. Use this cash for food and gas. This could be hypothetically an average income, about $140 that would suffice for all your needs. Trust me if you keep on doing this for years you will sure be able to save steadily and securely!
5. Buy what you Need Try to not indulge yourself in purchasing unnecessary items that you really do not need! Once you have sustained an excess money fund then you can spend a portion of that for your pleasure.
6. Think outside the Box Find other avenues and revenue streams you can add to your portfolio. For instance, dividend yields from stocks, real estate cash flow, do freelancing with one of your skill sets, buy/sell cars, start a blog, be creative!