The formula behind earning, saving and investing your money is simple. Spend less than you make. Save the remaining. Invest those savings.
- Subtract all your monthly expenses from your monthly income (income after taxes and all deductions) and the amount remaining is your savings each month (income – expenses = savings).
- Take some of those savings each month and invest it in an index fund in the stock market to earn more money. Keep the remaining in a savings account for emergencies.
- That’s it! No complicated formulas or advanced financial concepts needed.
Keep in mind, there are exceptions to every rule and formula.
- When you subtract your expenses from your income and you receive zero or a negative amount, it means you are spending more than you are earning. You should find ways to cut your expenses so that you can save at least $50-$100 per month. Even a $1 in savings each month invested will add up. You’d be surprised!
- If you are unemployed, earning a minimum wage or considered to be below the poverty level, it will be difficult to save money, in today’s economy. But, you shouldn’t give up. If you are able to save and invest $10 or even $1 each month, it will slowly add up and you’ll be surprised at the amount of savings you’ll have at the end of the year. Then, find ways to increase your income by looking for a better paying job in your field or getting financial aid to attend college and obtain a degree, so that you can increase your income and thus your savings.
I believe everyone has the power and skills to save money. It doesn’t require a fancy degree, complicated formulas, or advanced knowledge in finance. You just have to remember to spend less than you earn.
Happy New Year 2018 wishes to all of you out there. May this year be your year to shine in all aspects of your life.
While you continue to earn, save and invest, please keep in mind that health is wealth. Don’t ignore your health and relationships in pursuit of wealth. At the same time, don’t ignore saving and investing in pursuit of short term pleasures and gains. Finding a balance is the key.
If you haven’t started saving yet, I encourage you to start this year. Start with saving as little as a $1 a day and you’ll be surprised how easily it adds up. Add more to it whenever you can, add less when you cannot.
Have a great year!
Typically, the IRS will impose a 10% IRA early distribution penalty on any taxable amount in your IRA, if you withdraw money from it before the age of 59½. Fortunately, there are various exceptions to this rule under which the penalty may be waived. Here’s a list of the exceptions.
- Medical Expenses – If you have medical expenses that will not be reimbursed or if you are unemployed and need the money to pay for your medical insurance.
- Disability – If you are unable to work due to a mental or physical disability.
- Education – If you need to pay for expenses for higher education for you or your family.
- Inheritance – If you are the beneficiary of an IRA of a deceased person, the amount you withdraw from the inherited IRA is penalty free.
- Home Purchase – If you are purchasing your first home.
- Equal Payments – If you need money from the IRA for a few years and are willing to withdraw the same amount at a specified interval until age 59½ or for 5 years, whichever comes later.
- IRS Levy – If you need to withdraw money as a result of an IRS levy.
- Military – If you are called to active duty.
For more details regarding these items, you can refer to information provided by the IRS at the links below: