What do you think the 3 most common money mistakes are? If you answered “not having money goals”, “not trying hard enough” or “not having the willpower” then you would be wrong. Saving money has nothing to do with willpower or effort or goal setting. You can save money with very low effort and without even realising you are doing it. However, you need to have successful money systems. The majority of people live paycheck to paycheck for 3 pretty common reasons and they all have to do with the direction money flows and where it goes.To hammer this point home:

  1. 58% of Americans Have Less Than $1,000 in Savings
  2. Of this 35% of all adults in the U.S. have only several hundred dollars in their savings accounts
  3. 34% have zero.
  4. Only 15% have over $10,000 stashed away.
  5. This is a little better in the UK with only a quarter of people in the UK without any savings.

If saving money was simply down to effort and people’s best intentions these figures would not be so dire. It’s actually mostly down to 3 mistakes that people make when they approach money. By contrast, people who amass vast amounts of wealth by their early 30s do three things that go against the gain and the common money behaviours. So, you need to decide which group of people you want to follow.

#1 Not Paying Yourself First

The majority of people are so focused on the compulsory tedious payments that they forget about themselves. By the time every bill is paid and they’ve spent a bunch of money on groceries, tv and phone contracts, saving money also becomes a chore.You might feel that you have so little money left, it should go towards some fun. Whilst you should have fun money, this doesn’t have to be at the expense of saving.

This approach to saving money needs to be put in reverse. You should put your dreams and future first. By saving money first, it becomes exciting because it’s the first step to designing your life in the way that you want. Paying yourself first rather than your bills puts you in the driving seat and forces your lifestyle expenses to fit into the box-size that you choose. Rather than being an afterthought, saving money is first the first priority and this simultaneously makes it easy and effortless to save.The first thing you need to do to make this happen, is to download my reverse budgeting template and this will help you easily structure your finances into a successful model.

#2 Not Automating Your Payments

I am the laziest person ever when it comes to life admin, so the idea of having to think about saving and paying all my bills makes me shudder. If I had to actively manage my finances I would probably save very little and It’s even less likely I would pay myself first. Especially as I have around at least 4 accounts that money is funnelled into after I get paid. In addition to my current account and joint account I also have:

  • Help To Buy ISA: £200 per month
  • Stocks And Shares ISA: £600 per month

By automating these payments, I’ve been able to build a net worth of £60,000 and this has started to snowball as my income and investments have grown in my late 20s. As a result, my plan to quit the rat race in 2036 at age 45 is coming together.

#3 Not Investing Early Enough

This is the most difficult pill to swallow for most people. This is because most people don’t want to face up to the fact that if they don’t invest then they will never be wealthy or financially free. People feel it’s safer to keep their money in cash or buy the biggest house they can find. However, this only accomplishes two things:

  1. Losing money and purchasing power to inflation
  2. Debt in the glorified form of a mortgage.

People also like to think that they can defer this part of their financial journey until their 40s or 50s when they are closer to retirement or will have more money. Again this accomplishes two things:

  1. That they will lose hundreds of thousands of pounds or dollars in compound interest
  2. They will have to work longer and save harder to achieve a comparable amount of wealth to someone who started in their 20s.

The below graph demonstrates this by highlighting the portfolio difference if when one person delays investing just £200 a month by 10 years. Despite investing just £24,000 more, Lizzy’s portfolio is worth £140,000 more.

Investing Early

Change Your Behaviours Now

If you choose to defer saving and invest now, you only make saving money or achieving financial freedom more difficult than you have to. The later you leave it, the steeper the hill to financial freedom becomes and the more effort you need to put in. However, if you put in the effort now, the terrain will remain relatively flat and your journey to financial freedom much easier.

The people who leave it late in life, are the 65-year-olds at your work grumbling and groaning every day. If you take this message seriously now, then you will be on a beach at 40 or 45 whilst people in your age group will be working until 67+.You can literally do these 3 things and you will be set up for a healthy, wealthy and successful lifestyle.All you need to do today is:

  1. Download my reverse budget.
  2. Automate the savings amount that gets calculated for you*.
  3. Start learning the very basics about investing.

*You can input this number into my Financial Freedom Calculator to see how much you need to invest each month to reach financial independence by any given age.

Don’t Chose The Deferred Lifestyle Plan

Don’t choose the deferred life plan. Start saving money this month and consistently into the future. Learn how to invest and bring your retirement date decades into the future. Whilst you are designing the future lifestyle you want and approaching enough passive income to quit your job, the same people in your cohort will still be living paycheck to paycheck. They’ll be scratching their heads wondering how you live such an amazing lifestyle whilst they’re working hard to even consider stopping work in their late 60s.