Simple Savings Plan - The Basic to Financial Success!

Establish a Simple Savings Plan.  No guides on wealth creation can start at any other place.

Barring any special situations such as winning a big lottery or inheriting a big sum of money, having a savings plan is a must.

Savings is the first universal law of wealth creation. In order to achieve financial success, one has to develop a proper savings ethics, and a proper plan. This is a documented economic fact. Before looking at any methods of developing this savings ethic, we need to look at the sources of income.

This means that the income (money) is being generated without having to "physically go to work".

Quite understandably, having enough "money at work" is an enviable position.

So how do we achieve this enviable position? Income from "money at work" is the beginning of financial independence for most people.

Unfortunately, there is no way for most wage earners to become wealthy through earning salary. By the time taxes and inflation erode the surplus created by raises, wage earners are left without much to show for their efforts. It seems to me the majority of people certainly have a hard time to be a financial success. Check out the link but do remember to come back by using your "back button" on your browser.

Unless the average wage earner can find a way to put some of his income aside so that is can become capital, they are doomed to living month to month for a long time.

The only solution is to convert income into capital.

In most cases, the first step to convert income into capital is to have a consistent savings plan.

Savings is "personal profit". What do we mean by this? Basically this means it's the residual after the fixed and variable expenses have been met. Your profit occurs after everyone else gets paid. This includes the mortgage holder, the landlord, the utility company, the supermarket etc.

It is an usual fact that savings is the last thing that happens, and it usually happens on a haphazard basis.

What most people don't realise is that you can't have an end result without going through the process. Financial success, through compound interest can only occur once you have overcome the savings inertia.

There is an easy way to determine how long it will take for money to double.

If we analyse the concept of compound interest, you will realise why so many people are not able to reap the power of this concept. Basically, nothing much happens during the first few years and the money only builds up "exponentially" much later. It is this "non-activity" that deters so many people from keeping to a consistent savings regime.

And the bad news is that when we withdraw the money prematurely, we break the chain of compound interest. This will mean we have to go back to the beginning again. And we know that with compound interest, nothing happens in the beginning. Boring huh? Yes, but it is something we have to discipline ourselves to do if we were to reap any benefits from this very powerful concept.

There's one more lesson to be learned here. That is the price of procrastination. The longer you wait, the tougher it is to let the power of compound interest work for you.

Assuming the retirement age at 55 years old, a person who starts his long-term savings plan will have a 30 years to work his plan. Compare that to a person who starts at 40 years old. By the time the 25-year old reaches 35 years old, he would probably have worked through the initial "boring" years where nothing happens to his money. His money would have started compounding at an exponential rate. Compare that to the 40-year old who has not even started! The difference in results would staggering!

So to summarise, it is important to immediately start a long-term savings plan beside the usual short-term savings plan (which is essentially a "deferred expenses" account). And even more importantly, to have the discipline to follow through it.

Remember, you have to let the process of compound interest work without breaking the process. And it will work only if you give it enough time.

Of course, in order to save money, one needs to earn enough to save in the first place. One way to do it is of course to have additional streams of income. There's one course which I highly recommend, and it's free! It will definitely help in wealth creation! Click on it to receive The Affiliate Masters course... It's an intensive 5-Day e-mail course on becoming a high-earning affiliate champion.

Now, let's move on to something many do not want to talk about ... Budgeting. Click here.