Do you want to build wealth? How you can save more to build a nest egg.
Most people define a nest egg as a sum of money set aside for retirement.
The original definition is: A real or artificial egg that is put in a hen’s nest to encourage it to continue laying after the other eggs have been removed.
In respect to creating a financial nest egg, we are more like hens than we realize. If you have debt and no money, you are likely to create more debt, not attract wealth and build savings. If you have savings, it is easier to save more money, just as the chicken is more likely to lay eggs if one is already in her nest. So, if you have some savings, you’ll feel inclined to make that pot of savings grow. The bigger it gets the more reluctant you will be to spend it because you’ll enjoy the feeling of having that nice nest egg and the security and comfort it provides. As your nest egg grows, you’ll naturally shift from being a spender to a saver.
This is why you shouldn’t put all your money towards paying off high interest rate credit cards. Though the interest rates on savings are often paltry, you need to create that nest egg by setting up a savings account and adding to it every month, even if it is just $10. Pay yourself first, then pay off your credit cards.
One man decided to start a nest egg with silver coins, since to him they felt like true wealth, as opposed to regular coins or dollar bills. He got a glass jar and converted any savings into silver coins until he had saved thousands. At that point, he converted them into investments.
Here is the trick to growing your nest egg even faster.
Let’s say you are prepared to pay $800 for a new refrigerator and you go into the store and ask if there is any discount or perhaps you buy the floor model and save $100. Take the $100 you saved by negotiating and put that in your nest egg.
If you decide to pack lunch instead of eating out, then take the $5 you would have spent at a deli and pop that into your nest egg. This is why it may be handy to have a jar in your home to stash the savings away or immediately transfer the money from your checking into your nest egg savings.
This strategy will soon have you looking for ways to attract wealth and save so you can add more and more to your nest egg. Yes, even spendthrifts can quickly convert to being good savers with this simple savings plan because of the natural incentive. It is one of the most practical wealth attraction tips you will find.
Build Wealth Faster: Plug the Money Drains (Tip 23, Coach Yourself to Success)
After discovering a few years ago that my husband and I were overspending, I began reviewing all of our accounts, investments and financial expenses. This was to ensure we were doing the best we could with our resources and getting the greatest possible return. I discovered that I had been lax about the investment side of our portfolio. While my husband is in charge of generating income to cover our living expenses, I’m in charge of saving and investing for our retirement.
We try to live off one income and invest the rest.
I’d left too much money in savings or checking accounts that were generating little or no interest. I had also been overlooking little charges that have been happening for years.
For example, because I own my own domain name, LifeCoach.com, I don’t need to use an internet provider. I cancelled the monthly email service that has been charging $21.95 a month for the previous 12 years. Funny thing — when I called to cancel, they told me of an email service I could get instead for $4.95 a month. It looks like a small expense in the scheme of things, so I nearly said yes. But these little monthly and yearly expenses can add up to astonishing amounts. For example, if you pay $25 a year for your credit card and keep your card until you are 85, at 8 percent interest that $25 would add up to $6,476 if you’re forty-five today; $14,344 if you’re thirty-five today; and $31,330 if you’re twenty-five today. I don’t even want to think what the numbers would be at $21.95 a month!
The point is, most people think that saving an additional $25 a year won’t make any difference.
But as you can see, it most certainly does, assuming you take the $25 you would have spent and instead put it in an investment earning 8% or more. The remarkable power of compound interest!
One of my current wealth-building strategies is to call every one of my annual and monthly services to cancel and see what they say. I’ve discovered that they will either waive the fee for me completely (one credit card was willing to put it in writing and sent me a letter saying they would guarantee a fee-free card for life rather than lose my business) or offer another similar service for less. On the rare occasion that they won’t lower or eliminate the fee, I simply say, thanks, but I’ve changed my mind and will keep the service after all.
Now is a great time to review your credit card statements and look for sneaky little monthly or annual fees. Call to cancel and watch what happens.
P.S. You can read the full tip, plus 100 more, in Coach Yourself to Success: 101 Tips for Accomplishing Your Personal and Professional Goals (McGraw-Hill, 2014).
Learn more about financial freedom in the FIRE course.