Ben Nash’s book Virgin Millionaire is a step-by-step guide to making your first million dollars. (Getty/Provided)
In my experience helping tens of thousands of people with their money, saving is an area that less than 1 percent of the population actually addresses. The remaining 99 percent have to work harder to achieve economic status.
Saving money is the main domino that governs every investment decision on your way to becoming a Virgin Millionaire. The importance of being secure in this important area of โโyour finances cannot be overstated.
However, keep in mind that what you need depends on what smart money stage you are in.
Here we outline five steps to growing your wealth.
How can I build a foundation for savings?
In the foundation stage, you’re trying to build traction and momentum early, so having tight control over your spending will help you progress faster and accelerate your Virgin Millionaire momentum.
Focus on building good habits around your spending behavior. This will make your life much easier at each subsequent stage.
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Cut expenses that seem unimportant so you can save more and focus on ways to increase your income.
Short-term income increases can help you achieve your goals to move on to the next stage, but you also need to think about the long-term, considering you still have a ways to go to become a Virgin Millionaire.
Long-term changes in income are often larger and more impactful, whether you pursue further education, pursue a promotion or career advancement, or change industries or careers.
How can I focus on saving?
During the focus stage, your biggest savings and investment goal is to buy your first investment property, and the more you save, the faster you can reach your goal.
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Following the foundation stage, you need to closely control your spending to keep your savings strong.
If you removed things that were important to you during the foundation stage, you may want to consider reintroducing them now, as long as you can without significantly jeopardizing your progress.
At this stage, your focus should still be on increasing your income so that you can increase your savings and accelerate your progress.
How can I optimize my savings?
Once you reach the optimization stage, you have completed your efforts to create momentum and consistency around your savings and investments.
While it’s important to keep building momentum, you may also want to start thinking about creating a better balance between saving and spending.
If there is something important to you from a lifestyle perspective, pay attention to it now.
By this point, you will have solid and growing investments in both stocks and real estate, which should take some of the pressure off your initial savings rate.
As you move through this stage, your spending may increase until you get closer to your ideal lifestyle spending plan.
While spending more is a good thing, there are some downsides to keep in mind when it comes to spending your money wisely.
First, spending slows down the rate of savings.
Second, the Smart Money Freedom target value increases because it needs to support higher levels of spending in the future. Therefore, more investment funds are required to achieve this higher income.
These are negative in terms of economic progress, but positive in terms of lifestyle. Balance is the key here.
Don’t fall into the trap of thinking that just because you have more money to spend, having a good savings system isn’t as important as it used to be.
How can I accelerate my savings?
At this stage, you should have no problem covering everything that is important to you.
As with the previous stage, increasing your spending to cover your ideal lifestyle will lower your savings rate and increase your goals at the same time.
By the time you graduate from the “acceleration” stage, you should be 10/10 satisfied with your spending and savings rates.
However, you need to think carefully about what your ideal lifestyle is and how much money you need to achieve it.
You’re getting closer and closer to being able to spend your money wisely, but the last thing you want is to realize you missed something and have to take a step back.
As with the optimization phase, the risk here is that you suddenly have less control and less clarity over spending and saving. This is a costly mistake.
How can you make the most of your savings?
At this point, you should already have reached your ideal spending level and should be able to do just about anything you want.
This may include leaving formal structured employment to earn a salary.
However, keep in mind that once you turn off your income faucet, you won’t be able to grow your investments at the same pace, so managing your spending and savings will be even more important than at any other stage.
The good news is, you’ve developed some serious planning, spending, and saving skills and good habits, so you can focus on maintaining what you’ve accomplished rather than starting something new. It means that it will become like this.
Ben Nash is a financial expert commentator, podcaster, financial advisor, and founder of Pivot Wealth. Ben’s new book, Virgin Millionaire. A step-by-step guide to your first million and beyond is now available on Amazon Audiobooks.
If you want to review your existing mortgage and see how much money you could save, you can use our free mortgage comparison tool here.
Disclaimer: The information contained in this article is of a general nature and does not take into account your personal objectives, financial situation, or needs. Therefore, before acting on any information, you should consider whether it is appropriate for your circumstances and, if appropriate, seek professional advice from a financial professional.