Ten Decisions You Need to Make to Get Rich By Robert Kiyosaki

Today, because of the multitude of choices we all have, it is easy to get distracted from where we want to go in life. I offer you a few suggestions on how to find your path and stay on your path to great wealth, if you should choose to do so.

One night in 1975, I sat in my little apartment and began to choose the path I was now to take. I had to again decide which dads path I would follow, my rich dads or my poor dads. I had been off track for 10 years and it was now time to get back on track.

These are some of the decisions I made and have continued to make over the years.

Step One: Decide to Be Rich

That night in 1975, I had to stop feeling sorry for myself and decide again to be rich. I went over some of the lessons my rich dad had given me - lessons that were more important than money, because they would ultimately create the financial empire I wanted.

I sat quietly that night and my lessons began all over again. I could hear my rich dad talking. The only difference between the rich, poor and middle class, he said, is the kind of lifestyle they want. You dont have to be psychic to tell a persons future. If you listen to the words a person uses, they will tell you their future.

Rich Dad believed that words were a persons most important tool. He constantly reminded me to watch the words I spoke, simply because he believed that the words you speak and the words you think ultimately become the world you live in. He often quoted the Old Testament: And the word became flesh.

So that night, I remembered Rich Dad reminding me to listen to different peoples words. I noticed that poor people often said:

I just want enough money to pay the rent.

I need a few dollars to get to the next pay day.

After I pay my bills, I don't know how my family can afford to eat.

People who used words such as these, often focused only on financial survival. Rich Dad often referred to these people as poor people, because they were poor managers of money. So a person who thought or spoke words such as these was constantly fighting for financial survival, regardless of how much money they made.

The middle class used different words because they had different ideas about how to use their money:

Our home is our most important asset and our largest single investment.

Were setting a few dollars aside every month, so we can afford the down payment on our dream home.

Were saving money for our childrens college education and our retirement.

I noticed that the middle class focused on comfort. That is why so many of them say, I dont want to be rich. I just want to be comfortable.

That night, I recalled the words my rich dads rich friends used:

How did you finance your shopping center? Did you syndicate it with a joint venture partnership or did you go to a hard money lender for the interim money?

My underwriter has a new private placement, pre-IPO offering. Do you want a position in it?

I bought the shares through my corporation because the long-term tax consequences are better.

The rich used the vocabulary found in the asset column. Rich Dad said, The rich are rich because they are not focused on day-to-day short-term survival, or the expense column as the poor are. Nor are the rich focused on comfort and the acquisition of liabilities using credit, as the middle class is.

The rich are rich because they focus on the long-term acquisition of assets... assets such as stocks, bonds, businesses and income producing real estate. Many times the rich will forsake meals, a steady pay check, a vacation, or the comfort of a nice home, to build or acquire real assets.

So decide to be rich, even if you are broke and penniless today. In Rich Dad Poor Dad, I wrote of the difference between being poor and being broke. Poor is a state of mind where thoughts such as I cant afford it or Live below your means come from. Being poor is eternal but being broke is temporary.

The opening chapter of The CASHFLOW Quadrant is called, Why Dont You Get a Job? It begins with my wife Kim and I being homeless for about 3 weeks. Even though we were virtually out of money, we continued to strive to become rich, to build a business and invest through that business.

Today, even though we have plenty of money and several businesses, nothing much has changed. We continue to build businesses, reinvest in our businesses and invest through those businesses.

In The CASHFLOW Quadrant, I wrote about Be-Do-Have. Be is the most important part of the three word formula. Most people want to Have what the rich have, but they often are not willing to do what the rich Do to have what the rich Have.

So whether you have money or not, it is important to Be rich if you decide to do so, which means being willing to make being rich more important than merely surviving financially or being comfortable.

Step Two: Decide What Kind of Money Problems You Want

There are only two kinds of money problems: not enough money or too much money. Unfortunately, the kind of money problem most people know is not enough money.

Rich Dad stressed that his son Mike and I know not only how to make money but what to do with the money we made. Rich Dad said, Most people know how to work for money, but they do not know how to have people and money work for them. So he taught us how to plan on having too much money.

He said, If you want to be rich, you must make sure your excess money creates more excess money. You must know what to do with your excess money before it gets to you. Most people, when they receive any excess money, spend it foolishly or just park it in the bank.

So decide what kind of money problems you want.

Step Three: Write Your Plan and Follow It

After choosing between being rich, poor or middle class, and then choosing between too much money or too little money, its time to write your plan.

If you have chosen to be rich, even though you are broke today, and have decided to have the problem of too much money, read on. If you do not plan to be rich or to have too much money, then you need not read any further.

Rich Dads plan started with a few basic goals:

1. Change the characteristic of your income. Start a part-time business.

2. Change the characteristic of your expenses. Convert personal expenses into business expenses.

3. Place your business inside a legal entity.

4. Have your business buy your assets.

5. Harness the power of reinvesting.

If youre willing to be a little uncomfortable to become very rich and retire early, develop your plan even though you may be broke, but not poor, today. And if you are already rich, Rich Dads plan may help you become richer and happier...even beyond your wildest dreams.

Step Four: Decide on Where You Want to do Your Banking

Rich Dad often said that you could tell the difference between the rich, poor and middle class simply by where they went to get their money or to do their banking.

Rich Dad said, A poor mans bank is a pawn shop. A pawn shop lends money on assets that a banker would not loan money on. When a poor person is short of cash, they will often go to the pawn shop and put their chainsaw, microwave oven, jewelry, TV sets, tools, or watches up as security.

The pawn shop gives them cents on the dollar, because what the poor spend their money on is not worth anything after they buy it anyway. The pawn shop makes money by charging legal usurious interest rates.

The middle class has the creditworthiness to use banks, savings and loans, or credit unions for their lines of credit. A popular form of credit for this group is the credit card, which is easy to obtain.

The rich also use banks. But they often use different banks. They use the services of investment bankers, or find private capital from wealthy individuals, or money from institutions such as pension funds, insurance companies or the stock market.

The rich, if successful as business people, have fewer problems raising large sums of money and at better interest rates. So decide where you will do your banking.

Step Five: Choose Your Friends and Partners Wisely

One of the reasons the rich get richer is because they spend time with other rich people. Most of my best investments come from my rich friends, not from my stock brokers or real estate brokers. It is important to know if a persons aspirations are to be rich, comfortable or simply survive.

Friends who merely want to be comfortable or survive will not understand why you want to be rich and may unconsciously pull you down. And besides, the investment tips I get from people who only want to be comfortable are often tips on investments that no one else wants.

How do you find people who are rich or want to be rich? Rich Dad had a simple answer: Its what you know that determines who you know. If you want to change who you know, simply change what you know. So the most important investment you can make is in your financial education and financial experience. Invest in that first and the people you spend time with will change.

Step Six : Give Yourself Time

It takes time to build a business as well as an investment portfolio. Building a business is not the same as getting a job. With a job, you expect to be paid soon after starting work. With a business, you may not be paid for years, if you are paid at all. That is why I recommend keeping your daytime job and starting a part-time business.

It is said that 90% of all businesses fail in the first 5 years. In my opinion, there are two main reasons for this sad statistic. One reason is lack of education and experience. Business is not something you can learn in school. Business is a combination of formal education, experience and guts.

The second reason is lack of money. We have heard the old cliche Killing the goose that lays the golden egg. When starting a business, many people kill the baby-goose before its old enough to lay the golden egg.

In other words, most small businesses are undercapitalized, which means the new business owner tries to support him or herself and often a family on a business that is not yet up and running. So the business is drained of cash when it needs it most to grow.

Step Seven : Start Small, Dream Big

In 1975, I realized that my $700 in savings was not much when compared to Mikes hundreds of millions of dollars, which were rapidly growing into a billion dollars. Initially, I felt like giving up, saying to myself, Whats the use. Ill never have more than Mike. But then I realized that if I continued with that thought process, not only would I never have more than Mike, I would never have much of anything.

I was comparing myself with Mike and trying to compete with him, rather than use him as inspiration and as a mentor. So that night I decided to dream big and start small.

Many people start small and stay small, simply because they have small dreams. In my opinion, big dreams are important because they possess ingredients vital for success: hope, desire, passion, energy, vitality, faith, drive, inspiration and creativity. These ingredients make life worth living.

So dare to dream big. Dream of all the wonderful things this world and life have to offer. Write your plan on how you can have all your dreams come true and look at the plan every day. Talk to people about your dreams, even those who criticize them. Then use their criticism to make your desire even stronger.

Step Eight: Before You Expand You Must Contract

In 1975, I knew that if I was to achieve great wealth quickly, I first needed to tighten up before I could expand. I was hurting financially because I had been sloppy with my money during the past 10 years.

In college, Id spent a lot of money just having fun. In Vietnam, Id developed the attitude of living life to the fullest because tomorrow I could be dead. If I was going to get ahead, I first needed to pull back a little. Instead of playing golf, rugby and tennis, I focused only on rugby.

Instead of spending every night in the clubs or watching television, I needed to get back to studying. Instead of trying to be everywhere and do everything, I decided to focus. I began doing more of fewer things.

So, regardless of what you did yesterday, if you want to do better financially tomorrow, you may need to forgive your past, tighten up your activities today, so you can have a bright and prosperous tomorrow. To expand, you must first contract.

Step Nine : Get Bigger Faster

The problem with a small business or small investments such as one single family rental, is that you have to do all the work. You do all the work because there is not enough money to support paid management. So you own it and manage it.

Very often, a person begins to buy real estate and soon quits because the work is hard and the pay is low. They started with a small plan and stayed small.

For business or investing to work for you, in most cases you must get big. Instead of buying only two rental properties, plan on acquiring at least 20 properties as soon as possible. (But make sure you know what youre doing first.) With 20 properties you can afford professional management, if the cash flow is strong, or you can trade the 20 units into one larger apartment house or office building.

The same goes with businesses, especially franchises etc. If you have only one franchise, you are the chief cook, bottle washer, owner and manager. If you have 20 of them, you have a chance of finding freedom faster.

The people who dream small, think small, and work small, work the hardest and are paid the least. So that night in 1975, I vowed to focus, acquire education, gain experience, start small and get big as quickly as possible.

I always remind myself of my rich dads words: The bigger the asset you build, the less you work and the more money you make.

Step Ten : The More You Share, The Richer You Become

In 1975, I knew that if I wanted to acquire great wealth quickly, I had to be a person who shared. I had to be generous. If I was greedy, stingy or tight, it would take me longer to attain great wealth.

So, I decided to operate out of the B (Business Owner) quadrant, rather than follow my poor dads ideas on labor unions and protectionism. I knew that I needed to focus on doing more for less money, for more people. I needed to focus on sharing as much of my wealth with as many people as possible.

So Step Ten is to be generous and share. If you do that, you will become far richer than those who work only for themselves.

Every day we are presented with multiple choices, so that we must continually choose and re-choose our chosen path. If you choose to be wealthy, use these ten steps to find your path and to stay on track.

20 Lazy Ways to Save MoneyRich Dad Add comments

Sep 172009While the media cant decide if the recession is nearing its end or not, we do know that there hasnt been a tremendous surge in wages, job creation or the stock market.Consequently, most of us are staying pretty conservative on our spending.Here are a few relatively simple ways to keep an eye on your pennies while youre waiting for that brighter economic future to arrive.

1. Schedule automatic payments.Have (at least) your fixed monthly bills paid automatically to avoid missing a payment and having to fork over extra money for late fees and/or interest.You can set up auto pay features through your banks online bill paying service or by arranging it directly with the company or service provider.

2. Eat your groceries.Did you know that Americans regularly throw away nearly 15% of the food they buy at the grocery store each year?That can add up to hundreds or, depending on your supermarket budget, thousands of dollars each year.Save money by actually eating what you buy.Not sure how?Bypass the bookstore and borrow a cookbook from the library!

3. Bundle services.If youre paying different vendors for similar services you may be overpaying.Call your communications providers to see what price youll be quoted if you switch and bundle your internet, phone and cable TV services.

4. Pay off credit card.If youre not paying off your credit card balance each month youre paying interest and, for most Americans, its a pretty steep rate.Pay it off and you could save a tidy sum by eliminating your interest charges.

5. Mark your calendar.Whenever you rent something library books, videos, etc. mark it on your calendar and save money by avoiding those quickly mounting late fees. Many stores and libraries also now offer email reminders to help the constantly harried so sign up for the extra help!

6. File your taxes on time.Or if you need to file an extension at least pay what you owe on the due date.Youll avoid annoying notices from the IRS and, more importantly, save on penalties, fees and interest.

7. Roll it over.If youre switching jobs and you cant leave your 401(k) invested with your current company, roll your 401(k) into either your new employers 401(k) or an IRA within the 60-day window instead of withdrawing the money.By doing so youll keep the money invested and earning interest and avoid those nasty taxes as well as the additional 10% penalty.

8. Switch credit cards.If youre carrying a balance on a high interest rate credit card check out other card issuers to see if you could transfer your balance to one with a lower interest rate and fewer fees.Use sites like Creditcard.com or Bankrate.com to compare card rates, and pay careful attention to how long those terms last so you dont wind up paying a higher rate and erasing any potential savings.

9. Use your privileges.Are you an AAA member?Do you belong to the AARP?What about your local credit union?Check organizations you have memberships with to see if they offer buying privileges or discounts.

10. Rent instead of buy.You might be excited to expand your driveway but dont let your enthusiasm overtake good sense. Hold off on buying that jackhammer and think before you spend on big-ticket items or items that youll use once or infrequently (like movies and books).

11. Buy instead of rent.Dont pay the exorbitantly high prices charged by rent-a-center type stores for items youll use regularly and keep long-term like computers, furniture and appliances.

12. Ask.Thats right, just ask.You cant be paying any more than you currently are, so why not ask if you can get the interest rate lowered on your credit cards or loans? Also, ask for a discount on services like your wireless phone, trash removal or pet care instead of switching to another vendor, and of course ask is that the best you can do on any big ticket purchases like cars, appliances and furniture.

In a tight economy it might be worth the sellers while to cut the price instead of losing the sale, and youll both benefit in the end!

13. Just say no.To the extended warranty that is.They hardly ever make financial sense.Weigh the repair or replacement cost (and if you would even need or want to repair or replace it down the road) against the cost of the warranty and graciously pass when offered.

14. Have the awkward conversation.Americans average more than $750 yearly on holiday gifts and thats probably much more than most would like to spend.If your gift-giving is costing you more than you can realistically afford theres a good chance its more than your relatives can afford (or would like to spend) as well.Take the plunge and broach the subject.Offer a more reasonable alternative (say, limit giving to children or put a dollar amount on gifts per person).More than likely your relatives will be grateful SOMEONE finally raised the subject and youll save money in the process.

15. Eat at home. If the idea of cooking for yourself seems like too much work at least opt for take-out instead of dining out youll save on the tip, the alcohol and most likely the cost for appetizers or dessert.

16. Balance your checkbook.It might take a few minutes but its something you should be doing anyway and it can pay off huge dividends by helping you avoid bouncing a check and incurring steep overdraft fees (not to mention a little embarrassment)!

17. Stick with your bank.When withdrawing cash drive or walk the extra minute it takes to use your banks ATM and avoid the fee that could come with another banks machine. Better yet switch to a bank that doesnt charge fees!

18. Use your TV.If youre paying for cable why not use all of it and save some money in the process?Cancel the video membership and watch movies through cable movie packages youre already paying for or check out your free on demand shows. Drop the gym membership and work out at home to channels like FitTV, and bag the magazine subscriptions and watch the same shows (like Martha Stewart) on TV instead.

19. Quit those bad habits. Smoking,overeating anddrinking are costly habits to maintain.Okay this is the lazy way to save, not necessarily the easy way.But you can save boatloads of money in two ways by saying sayonara to your favorite vices: (1) Youll save money by cutting out on the regular spending its costing you, and (2) youll probably save on insurance premiums and long-term health costs.Its the ultimate win-win.

20. Forget the pet. Sure it sounds heartless but did you realize that welcoming home a little Fido can cost you an average of more than $1,500 a year or $15,000 over 10 years?Feline fluffies are pricey too just under $1,000 a year or approximately $9,000 for 10 years of care.Looking at the long-term picture, thats a new car or the down payment on a home! Keep walking right past that pet store and keep the money in your pocket instead.

The recession wont last forever, but in the meantime take advantage of these lazy ways to stay on track financially, and develop some pretty good money management habits for the future!

Excerpt from:

Top 5 Things I Learned From Robert Kiyosaki

By: Scott Ewart

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About a year ago, I picked up the book 'Rich Dad, Poor Dad' by Robert Kiyosaki. The read was revolutionary for me and inspired me to move past fears that have stopped me from doing more with my life financially. Since reading that book, I have read several others by Robert Kiyosaki and his 'Rich Dad Advisors'. I have also attended several of his seminars and classes, both in person and via audio materials and workbooks. He and his advisors cover everything from real estate investing to increasing your financial IQ to starting your own business to conspiracies of the rich.

Robert Kiyosaki is a man from humble beginnings that learned 2 different ways of thinking from 2 different fathers. By employing them later in life, he was able to retire in his forties, never having to work again, and started a new life as a financial educator, business man, and investor. Everything he said about how his poor dad managed money - was the same as what I had learned growing up.

Reading through 'Rich Dad, Poor Dad' a second time, I really focused on the opposite of all I knew - and those were the ideas of his rich dad. These ideas were very logical, simple, and completely achievable. I knew then that I had to start thinking differently about how I managed my life not only financially, but personally and professionally as well. Here are the top 5 things that I have either gained a greater understanding of or learned more about from Robert Kiyosaki:

1. Focus on maximizing how much money you keep - and what you do with that money when you have it. As an employee of a company, you give approximately 50% of your income away in taxes to the government before you ever see it. You have no choice. You work for the company first, the government second, creditors third, and you count what is left over. Alternatively, as an investor and owner of your own big business, you have many more tax advantages and have more control over how much money you keep. You determine how much you have to pay the government AFTER you get paid, and not just take the leftovers like you do as an employee.

2. Start putting money away every day. Get 3 piggy banks labeled savings, investing, and tithing. Put a dollar a day in each. Or more. Or less. But what is important is the action of it being first thing every day - thinking about saving, investing, and giving away money versus being a consumer first and investors later. I tried it. It has really worked. Now I really think twice about wanting a coffee or something else frivolous. And the cash is accumulating very fast!

3. Learn about your finances - it is more than balancing your checkbook and checking your balances and paying your bills. What is important is to see your net worth by doing a financial statement. Learn that an asset is something that puts money in your pocket every month - and a liability is something that takes money out of your pocket every month. You need more assets than liabilities, and you need to know how long you could live if money stopped coming in. Learn about your finances, and do not be afraid to hire a bookkeeper to help.

4. Start thinking like a rich person does - you cannot get rich if you do not know how the rich people get rich. There are many strategies that the non-rich part of society does not know about. It is ok to model your strategy after theirs - remember to and start slow.

5. Start working for a network marketing company. Now, everyone says 'No Tupperware!' 'No Amway'. But the point of working for a network marketing company is this: Network Marketing companies, good ones, will train you. They will work with you to be successful. They have great training programs and mentors. You can do it part time while you get it started. You will learn how to sell, a core competency needed if you ever want to have your own business. You will also learn how to take rejection (which, as we all know is driven by fear). You will build your own business, get people working with you and for you, coach and mentor them to get the business to grow and eventually be able to run by itself. This will provide you with a nice residual income stream. This is the easiest way to start a business with low cost entry.

Taking these 5 ideas and applying them to your own life is part of a transitional way of thinking. In many cases, it is a retraining of how you are wired, how your brain is conditioned to think. It requires putting fears and stigmas aside, and deciding to slowly implement strategies that will put you more in control of your own finances, wealth, and destiny. And it is perfectly acceptable to want to be rich - it is simply ensuring that you provide a comfortable life for your family and your legacy. What is wrong with wanting that?

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How to Protect Yourself in an Economic CrisisRich Dad Add comments

Oct 302008-Sandra Simmons

Does the current economic crisis have you worried? Are you wondering how achieve financial freedom so you can protect yourself and your family from the coming financial crash? Here is what you need to know.

The first thing you need to understand is what the word economics means in terms of thinking about your family, and how you can use what it means to your financial advantage.

Forget what the media says about economics when they talk about the roller coaster ride of the stock market, supply and demand, inflation, banking industry mortgage defaults and the unemployment rate. Those are economic characteristics that measure an area much larger than you can control.

What you can control is your own household economics. The definition of economics I am using is the original one; meaning the art or science of managing a household or business. And that is something that you, as an individual, can control.

There is an art to managing a household. It takes having certain skills and abilities, like organizing things so they run smoothly. There is a science of managing a household, especially in the area involving money. Here is what you can do to make sure that the economics of your household are strong and stable, even though the economy of the country may be on the slippery slide to financial disaster.

Step 1: Make a Budget

The first thing that any good financial expert will advise you to do when setting out on the path to savings is to make a budget. An accurate budget will allow you to identify all of your necessary expenses, which in turn will give you the ability to calculate exactly how much you can afford to set aside for savings. Here are some simple steps for setting up your budget:

2. Time Frame: Before you start your budget, you will need to decide on the time frame that you will use. Is yours going to be a monthly budget, a quarterly budget or a yearly budget? The most popular time frame is usually monthly (due to the fact that most bills come once a month), so that is what we'll use for this exercise.

3. Income: The first thing that you'll need to do when coming up with your budget is to figure out exactly how much income you have coming in. This should include your monthly salary (after taxes) and any supplemental income you may have coming in (from additional jobs, investments or other income sources). If you are in a salaried position, simply divide your yearly income by 12.

4. Expenses: Here is where things get interesting. Now that you've calculated how much money you have coming in each month, you'll need to figure out exactly how much you spend during the same period. While some expenses remain constant and are easy to figure out (Rent, Car Insurance, Car Payments, Phone & Cable Bills), others are not so easy to pin down. Expenses such as utilities, gas, food and entertainment may change from month to month, so the best way to figure them into your budget is to come up with a monthly average for each one. Over a three month period, keep a record of how much you spend on each of these things and then figure out, on average, how much you're spending each month. Add up all of these things to come up with a monthly total of your expenses. BetterBudgeting.com offers a spending worksheet which can be used for tracking expenses.http://www.betterbudgeting.com/freeworksheets/monthlyspending.htm

5. Calculate the Surplus: Now that you've figured out your monthly Income and Expenses, you can start to determine how much you have left over for savings. Simply subtract your monthly expenses from your monthly income to find out how much surplus money you have coming in each month. Fill in the figures on a budgeting worksheet to calculate the surplus. Samples of this type of worksheet can be found at BetterBudgeting.com also.http://www.betterbudgeting.com/budgetformsfree-basicbudgeting.htm While you don't need to put aside this exact amount for saving each month, this figure can give you a rough idea of how much you can afford to save. Note: If your monthly expenses turn out to be larger than your income, it is a good time to figure out ways to reduce your expenses to keep your spending more in line with your income. To help reduce costs, consider the tips offered on the Mahalo Guide page for how to cut household expenses.

6. Keep Records: While writing out your budget on a piece of scrap paper once every year may seem like the easiest way to go, it is wiser to keep a continuing record of your expenses, income and savings in a permanent location for easy update. While software programs such as Quicken, Microsoft Money, and online money management services like Mint.com can make it easier for you to manage your personal finances on the computer, something as simple as a personal ledger or notebook can be just as effective for keeping tabs on your budget.http://quicken.intuit.com/index.jhtml?priorityCode=3979700000&sc=google-qkn_master_brand_gen&gclid=CJW2lfKgpJACFQGnPAodjgLc8A http://www.microsoft.com/money/default.mspx http://www.mint.com/ Mint.com

1. Step 2: Start a Savings Plan

Once you've resolved to start saving money, you'll need to develop a plan. While a good savings plan doesn't need to be an elaborate affair, it should include a basic outline of the methods you will be using to jump-start your savings. Here are some suggestions for developing a practical savings plan:

Set Goals: The best way to figure out how much you want to save is to set specific monetary goals.http://moneyfor20s.about.com/od/reasonsandwaystosave/ht/savings-goals.htm If there is a certain item you are saving for, start by calculating how much you need to save in order to pay for it. Next, figure out how much money you have to set aside each month in order to reach the goal in a reasonable amount of time. If you are saving for something with a less specific monetary value (such as money for an emergency fund, your retirement, or just a healthy nest egg), you should establish a goal to reach. Financial experts often recommend having enough money in an emergency fund to cover at least 3 to 6 months worth of household expenses.http://www.investopedia.com/articles/pf/05/EmergencyFund.asp

Keep Track of Your Finances: The best way to make sure your savings plan is on track is to keep a close eye on your spending. This can include monitoring your ATM withdrawals, keeping a copy of your bank statements, collecting receipts from your entertainment spending or updating your budget to reflect changes in your income or expenses. Not only can this help you identify where your money is going, it can also keep you up to date on how much money you are saving through not spending. If spending is not curbed to match the amount of desired savings, the savings account will not grow. How you track the spending actions is not as important as actually tracking them.http://ohioline.osu.edu/mm-fact/0007.html

Investing: Although most people think of investing as something done by people who already have a lot of money, it can also be a way for people with a modest income to help grow their overall savings.http://www.lowermybills.com/tipsadvice/savings.jsp Low-risk investment options, such as Individual Retirement Accounts (IRAs), 401(k)s, Certificates of Deposit (CD's) and Annuities can help people use the money they have to generate more money for saving.http://www.sec.gov/answers/annuity.htm http://www.investopedia.com/terms/i/ira.asp http://banking.about.com/od/cds/a/cdbasics.htm Some banks may even let you set up an Automatic Investment Plan (AIP) which automatically takes a portion of your checking or savings account (as much or as little as you like) and transfers it to an investment fund or retirement account.http://www.investopedia.com/terms/a/automaticinvestmentplan.asp

Savings Strategies: If your surplus income each month isn't enough to meet your savings goals, you're going to have to figure out ways of saving the money needed to reach your goals. While you don't need to resort to selling a kidney or donating blood every week, there are a strategies you can use to spend less and save more.http://pueblo.gsa.gov/cic_text/money/66ways/index.html

Step 3: Open a Savings Account

One of the basic tools you can use to help manage and further your savings goals is a savings account. Not only do savings accounts provide a safe, secure and convenient place for you to store the money you've saved, they can also (in certain instances) even help build your savings. If you don't have a savings account, it's time to set one up! If you already have a savings account, keep reading to make sure that you have the right one to meet your needs.

Different Types of Savings Accounts

Not all savings accounts are alike. Here are some of the most common types of savings accounts:

Basic Savings Account: This is the most basic type of savings account that banks will usually offer.http://www.bbvacompass.com/personal/savings/basicSavingsAccount.cfm Under this type account you can deposit and withdraw money and the balance may earn a minimal rate of interest. While money in a savings accounts may generate withdrawal fees if removed to frequently, this can be an incentive to leave the money in place when you're trying to save. Automatic transfers from checking to a savings account may be offered by the bank.

High Yield Savings Account: High yield savings accounts usually offer better interest rates than regular savings accounts but may come with more restrictions. Some high yield savings accounts have a minimum balance requirement and limit the amount of transactions that you can make each month. Some require a specific minimum amount for the initial deposit. To determine which bank option of high yield accounts is best for you, view a comparison on Bankrate.com to choose which matches your situation most closely.http://www.bankrate.com/funnel/savings/savings-results.aspx?local=false&IRA=false&prods=33&ic_id=CR_searchMMASavingsRates_checking_MMASavings

Money Market Account: Money market accounts usually pay a higher interest rate than regular savings accounts (and often give you a higher rate for a higher balance), although they carry restrictions. A higher balance for initial deposit may be required and fewer withdrawals may be allowed each month.http://www.investopedia.com/terms/m/moneymarketaccount.asp

Online Savings Account: With the emergence of online banking, many institutions started offering high-interest online savings accounts. Interests rates online may be higher than in the store front bank because the overhead is lower. Interest rates change on a frequent basis so research into which provider offers the best deal for you should be done when you are planning to open an account. Get Rich Slowly, a personal finance blog, offers a table showing rates current as of a recent time frame which is continually updated. The blog also contains comments by account holders about specific banking pros and cons.http://www.getrichslowly.org/blog/2007/03/21/which-online-high-yield-savings-account-is-best/ Companies such as ING Direct and HSBC Direct offer online savings accounts which may take the place of a traditional savings account.http://www.ingdirect.com/osa_google/ http://www.hsbcdirect.com/1/2/1/offer

Things to Consider When Choosing a Savings Account

Minimum Balance Requirements: Some savings accounts require you to keep a minimum balance in your account at all times and will penalize you if you fall below that amount. Tf your account does require a minimum balance, make sure you have enough money to meet the balance on a continuing basis.

Monthly Fees: Banks will sometimes charge a small monthly fee for the savings account, although some will waive the fee if you maintain a minimum balance. You will also want to find out if they charge extra for withdrawals, transfers or other transactions.

Interest Rates: Interest rates that are offered by different savings accounts can vary widely. Make sure to research different banks to find the best interest rates.

Access to Your Money: Banks have different rules when it comes to how you can access the money in your savings account. While some may not allow you to write checks with a savings account, others may allow withdrawals via an ATM card. Online banks without physical branches may require you to transfer money into your checking account before you can access it (which may involves a waiting period for processing). When choosing an account, consider how often you may need to access your money.

Step 4: Curb Your Spending

It may seem like common sense, but the easiest and quickest way to start saving money is to curb your spending. Of course you don't need to eat ramen every night and turn off your electricity to do this. With a little ingenuity (and a few helpful suggestions), there's no reason you can't find ways to cut back on your expenses. Here are a few to get you started:

Eat Out Less: While eating out can be fun and delicious, it can also take a serious bite out of your wallet. Try eating in more often and packing yourself a lunch for eating at work or at school. Besides saving money, making your own food can often be healthier too.http://www.lendingtree.com/smartborrower/Smarter-spending/5-tips-to-save-money-every-day.aspx

Eliminate Expensive Coffee Drinks: If you stopped yourself from buying a $3.50 latte every day from Starbucks, you would have about $100 a month extra to put into your savings account. Buy yourself a simple coffee maker and some ground coffee beans at the supermarket and you'll be able to get your caffeine fix without spending a fortune.http://www.ehow.com/how_2088024_save-money.html

Buy Used or Non-Brand Name Products: While the temptation to purchase the latest product from the top manufacturer on the market can be strong, the money you can save by buying used and non-brand name products can be substantial. Refurbished or "like-new" products are often just as reliable as new ones and can cost significantly less.http://moneycentral.msn.com/content/Savinganddebt/Savemoney/P36019.asp

Eliminate Unnecessary Expenses: No matter how frugal you think you are, there are always ways more ways you can cut the fat. That subscription to Angler's Weekly you never read? Those 500 cable channels you never watch? That 5,000 minute-a-month phone plan you never come close to reaching? All of those can go.http://www.lendingtree.com/smartborrower/Smarter-spending/5-tips-to-save-money-every-day.aspx

Energy Efficient Light-Bulbs: Although it may cost slightly more when making the initial investment, installing energy efficient light-bulbs throughout your house should reduce your electricity bill (not to mention being better for the environment.http://www.energyefficienthomearticles.com/Article/energy-efficient-homes---utility-bills----Ways-to-Save-Money-on-Your-Heating---Energy-Bills-/5500

Step 5: Get Out Of Debt

While we won't get into the specific details of the often complicated measures that many people will need to take in order to get out of debt (for more information on that, see Mahalo's guide to How to Get Out of Debt), we will go over the ways in which having debt can prevent you from saving money and how you can starting turning that around.

Pay Off Your Credit Card Debt: While having a credit card that you pay off in full each month is perfectly acceptable (even recommended if you're trying to build up your credit), having an outstanding balance that you have to pay interest on is a recipe for disaster. Think of it this way: Calculate how much money you pay in interest on your credit card debt (not paying off the balance, just the interest). Then figure out how much money you would have if you were to put that money into a savings account rather than into the pockets of the credit card companies. You get the picture.

Don't Buy Things You Can't Afford Outright: One of the main reasons that people go into debt (and consequently cannot save money) is that they buy things they can't afford on credit. Even if you eventually pay off the debt, the extra money that you pay in interest will mean that you've paid more for the item than it was even worth in the first place.

Save Money to Pay Off Your Debt: The same principles that you can use to curb your spending and start putting money away for savings can also be used to save up enough money to pay off your debts. Start by figuring out how much debt you need to pay off, and then calculate how much you will need to save each month in order to pay it off in a reasonable amount of time (don't forget to calculate the interest in). Once you've gotten yourself out of the red, you can finally start working your way towards a healthy degree of savings.

Conclusion

Even the most responsible, intelligent and practical people can sometimes become overwhelmed by their finances and have difficulty saving money. So if you are one of those people who can never seem to save enough money, don't worry! You are not alone. No matter how inept you think you are at saving, there is hope. And while it may take some changes to your lifestyle and spending habits, the steps discussed above can help get you on your way towards your savings goals. Because the temporary thrill that you get from spending money can't come close to the satisfaction and sense of accomplishment that you'll feel when you look at your bank account and see all the money you've been able to save.

The Basics

7 radical ways to save money

Want to really save? Take a look at how you spend and change it. Quit smoking, take in a roommate, park the car -- and you'll save as much as $12,000 a year.

By Jennifer Mulrean

It's getting harder to blame savings shortfalls on your measly pay stub.

In fact, how much you save has little to do with your income, research by economists Steven Venti and David Wise shows. It has more to do with whether you want to save and are willing to adjust to boost your saving.

Ventis and Wises 2000 study, "Choice, Chance and Wealth Dispersion at Retirement," found a wide range in how much people at the same income levels were able to save for retirement. The study also pointed out that it wasn't just the higher income folks who managed to save the most. Indeed, people in the lowest income groups were able to save more than some of their middle-income peers -- by about $100,000. (See link at left to read the complete study.)

Their conclusion? "Persons with little savings on the eve of retirement have simply chosen to save less and spend more over their lifetimes."

The key, then, is spending less than you earn.

Tahira Hira would agree with this conclusion. A professor of personal finance and consumer economics at Iowa State University, Hira has spent more than 25 years studying how and why people spend, and why some people get into financial trouble.

"We don't stop and think that earning money is only one part of financial health," Hira says. "The other part is learning how to manage money."

Many people don't have a clueA big source of money problems, Hira says, is that people just don't know enough about their own financial reality. "They don't know what they earn, they don't know what it takes to live, and they don't know their discretionary income."

Her advice? Educate yourself. Sit down with your monthly bills and statements and figure out your income and outgo. Then, decide if you like the picture you see. If not, you'll need to create a plan for changing it.

To help with the process, Hira recommends asking your self these three questions:

Who am I? What's my current financial picture?

How do I want to live? How do I want to use my money?

How can I make the best use of my money?

Treat managing your money like you would any other household task and allot enough time for it every month.

Hira notes that many of the financial tools that have made life more convenient -- such as credit cards -- can promote bad financial habits and prolong debt when misused. Credit cards should be used as the cash-management tool they are, not a borrowing tool, she says.

"We're spending tomorrow's money when we put things on a credit card," she says. "You keep locking yourself up and losing your freedom."

Her bottom line on financial health? "Stop spending."

7 radical savings tipsTo help curb the consumer in you, we've come up with a few of admittedly drastic savings strategies, along with some ballpark figures of their savings potential. (If you're looking for a real no-brainer way to save, arrange to have a certain amount of your paycheck automatically deposited into a savings account. Then, sit back and watch it grow.)

Hold the mother of all garage sales. Cast a critical eye on the stuff at the way back of your closets. If you haven't used it in six months, chances are you can do without. Same goes for all that junk in storage. (See "The hidden costs of too much stuff." ) Annual savings? Depends on how much junk you have, of course, but one coworker guessed he had at least $5,000 worth of stuff he could get rid of. I'd put my own garage sale potential down at around $1,000. Thats a good number.

Quit smoking. Pack-a-day habit? In Washington state, that's easily $5 a day -- or about $1,800 a year -- that can go right into your savings, not to mention what it saves you on insurance and health care.

Tame your driving addiction. In other words, carpool or use public transportation. This saves on gas, insurance and maintenance costs -- not to mention any money spent on aspirin. Using the IRS's 2002 mileage reimbursement rate of 36.5 cents per mile as a proxy for the cost of commuting, you could save $1,141 a year by driving half the time for 50 weeks a year (based on a 25-mile roundtrip commute). For an even more drastic approach, consider getting rid of your car if you live in the city. Some cities are now implementing progressive programs that allow you to have access to a car without the ownership hassles (e.g. "Flexcar" in Seattle, Portland and Washington, D.C. For more on Flexcar, see link at left.)

Buy used. The average consumer spends about $1,750 a year on clothing and its upkeep, according to the U.S. Bureau of Labor Statistics' most recent Consumer Expenditure Survey. You can potentially cut that in half by shopping at consignment shops and auctions, though the life of the goods may be less than buying new. To account for that, the annual savings may only amount to 25%, or $437.

Become a homebody. At just over $1,800 a year on average, entertainment spending has a way of quickly eating through the best-planned budgets. Consider the library for books, music and movies. Eat out less often. The average person spent $2,276 a year on eating out in 2002. Try cutting your spending in half on both areas for annual savings more than $1,900.

Cut your housing expenses. While a move across the tracks may save some money, moves are expensive in themselves. Consider renting out a room. The average housing costs per person in 2000 were just over $13,200. In metropolitan areas such as Seattle, rooms easily go for $400 a month. Figure about $20 of that goes to increases in utility costs, and you've still got an annual savings of more than $4,000 before any income taxes.

Cut up your credit cards. Build an emergency fund first to handle most unexpected expenses. This allows you to become your own lending agency. (OK, if you're chicken, try cutting up all but one.) Credit cards can be a cash-flow management tool, but paying only the minimum will keep you in debt for years. If you're the average American with at least one credit card, you probably have close to $8,523 in credit card debt, according to industry research group CardWeb.com. At an average APR of 14.4%, it could cost you as much as $1,100 a year in interest alone. By simply waiting until you've saved enough money to make purchases, you could eliminate those interest payments entirely.

If you're really ambitious and follow all the above tips, you could be looking at savings of nearly $12,000 a year. Figuring you can invest it at the historical rate of return at 10% your savings will start to compound nicely -- and rapidly.

Below are five frugal money saving tips that deal with all aspects of our financial health. Frugality is a state of mind. It's simply living in a more disciplined and controlled way.

The average family in the U.S. is only one month away from financial disaster. These families often own several cars, live in houses they cannot afford and carry $10,000.00 or more in credit card debt.

The following five strategies may seem simple or even simplistic, but they work!

Frugal Money Saving Tip 1 Awareness

The first step to financial health is awareness. Where does your money come from? What are you spending it on? How much, if any, do you save?

Financial stress and worry often lead to avoidance. As strange as it may seem, in our society at least, many people deal with lack of money by spending more. We are addicted to things and feed that addiction with easy credit.

Have the courage to face the reality of your financial situation. Courage will stimulate the clear, focused thinking you need to begin to manage, and use wisely, the money and other resources that you have.

Frugal Money Saving Tip 2 - A Balanced View of Money

A frugal person wouldn't buy it on credit but rather save their nickels and pennies and buy it when they had the money. Frugality is by no means a lifestyle that involves profound self-denial.

Money is not "the root of all evil." What that Bible verse actually says is that the LOVE of money is the root of all evil. (1 Timothy 6:10 KJV) Neither is money the ultimate source of happiness.

Saving pennies, nickels and even dollars is possible when you use coupons that you can print from your computer.

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Money is a resource that can be squandered or used as provision and blessing---for you and for others.

Three Perspectives on Money

Poverty perspective: Advocates of a poverty perspective believe possessions are a curse and reject materialism in every form. The person who thinks one must be poor to be humble is mistaken.

Prosperity perspective: Advocates of a prosperity point of view believe that wealth is a mind gamethat you can think and grow rich. Others offer a spiritual version that attempts to create a binding transaction with God in which He is obligated to bless you. Adherents to this approach often live materialistic lifestyles.

A balanced perspectiveStewardship: This point of view recognizes that possessions are a privilege not a right. Being a steward is an attitude, a way of looking at life as a caretaker, and sharer, of what has been given.

Frugal Money Saving Tip 3 Make A Plan

A frugal lifestyle of course involves a budget but let's break out of the stereotyped thinking for just a moment.

Anyone can learn to handle money more effectively. It starts with spending less than you make. Ignoring this simple truth plunges many people deeply into debt.

Here's a corrective strategy that can immediately begin to reduce your financial stress: Cut back spending by 20 to 25%.

Take a careful look at your life, and you'll find this is possible. Pack a lunch, stop eating out, get a video instead of going out to a movie, repair things rather than replacing them. Live more simply!

It's essential that you track your cash flow, and take control of your spending. Create a budget and stick to it! If you're living on your credit cards, something has to change. You're racing down a dead-end street, and might need some professional help.

Some people end up creating money-challenged lifestyles because they refuse to be responsible for how they handle their money. This can be corrected by simply changing how they manage their relationship with their money.

Frugal Money Saving Tip 4 Save

Most financial experts recommend that you "pay yourself first" by saving a minimum of 10% of your income. But the amount you save is not as important as developing the habit of saving! Even if you can only save 1% of your earnings, just do it! And once you commit to your savings strategy, stick to it every payday.

Frugal Money Saving Tip 5 Invest

While you are building up your savings, commit some time to learning about investing. Many community colleges have courses on stocks, real estate, commercial property, starting a small business, and even investing in coins or collectibles.

For the average person, investing can be a mystery. Terms like price to earnings ratio, market cap, and return on equity, can be a bit confusing to say the least but, in reality, are about as simple to understand as basic arithmetic. The first step to building your portfolio is to open a brokerage account. These accounts allow you to purchase stocks, bonds, mutual funds, and other investments by paying professionals to buy or sell the items you tell them to.

There are many online sources of investment information. You can scroll through the sites and learn about investing whether you sign up or not. When opening a new account, the minimum investment can vary, usually ranging from $500-$1,000 (and even lower for IRA's and other retirement and education accounts). Most offer the option of either having an application form sent to you, or allow you to fill them out online, print them, and mail them in with a check. The process is easy and can be done fairly quickly at almost all financial institutions.

Frugality Has Its Reward

Lack of money and out of control debt create tremendous personal stress, erode relationships at every level and contribute to high divorce rates. Businesses collapse due to poor money management and entire societies collapse due to poor distribution of all kinds of resources.

Life on earth is relatively short. Some live their lives without pleasure, constantly saving every penny for a future they may not ever see. Others live only for the moment, never saving anything for a future that may be longer than they imagine. True wisdom is finding that balance that will allow both present satisfaction and the possibility at least of a secure future. And while we invest in ourselves and our needs, we have the privilege and the responsibility to give to, and to invest in, those who need us.

Take the first steps toward to a new way of dealing with your finances with these frugal money saving tips and strategies.

Why Save

If you could look into your own future, could you afford to be there? The reality is, retirement costs money. And since most people dont plan to work when theyre retired, the money to pay for retirement has to come from somewhere else. The more you save now, the more likely it is that youll have the money you need later. A retirement savings plan is one of the best ways to save now for your future. And it doesnt have to be a big mystery.

Reasons to Start Early The example below shows how skipping just one year can affect your retirement savings.

Assumptions: This hypothetical example assumes annual $3,000 workplace savings contributions are made on January 1 each year beginning at the specified age and continuing until age 70. Assumes annual rate of return of 7%. Assumes annual tax-deferred compounding in a workplace savings plan. Your own Plan account may earn more or less than this example, and income taxes will be due when you withdraw from your account. Investing in this manner does not ensure a profit or guarantee against loss in declining markets. This hypothetical example is for illustrative purposes only and does not represent the performance of any security. Ways to Start Saving

1. The next time your salary increases (or you get a bonus), consider setting aside some or all of it before you get used to having the extra money.

2. If your expenses decrease, like when you pay off a car loan, try to set the entire amount aside for savings.

3. Pick a regular expense that you can reduce, such as dinner out or car washes, and save the money instead.

4. Take advantage of payroll deductions at work, direct deposit, or an automatic transfer from your checking to an investment account. If you save your money automatically, before you spend it, saving can be almost painless. Find out about automatic investing at Fidelity.

Start Small but Start Now

Don't feel that saving has to be "all or nothing!" You don't have to choose between current financial obligations and saving for retirement. Saving even small amounts while you're paying your obligations can put compounding to work for you. Pay yourself first! Have money deducted automatically from your paycheck or set up automatic savings from your checking account, so you save before you can spend.

Money you save now, even if only a small amount, has the most time to benefit from the saving principles of time, compounding, and tax-deferred growth. Additionally, it may never be easy to begin saving a larger percentage of your earnings all at once. Starting small and building your savings over time can be a good step toward reaching your goal.

Before investing in any mutual fund, please carefully consider the investment objectives, risks, charges and expenses. For this and other information, call Fidelity at 1-800-343-0860 or visit www.fidelity.com for a free prospectus. Read it carefully before you invest.

1 Spend Less Than You Make

Take a lesson from your parents or grandparents who made very little, but lived very well. Keep expenses down to a level below what you bring home in your paycheck after taxes. The fastest road to financial disaster is spending more than you make. Its possible to maintain your quality of life while cutting optional spending. This can be done by doing something as simple as renting a movie and making popcorn at home instead of going to the theatre, to buying a new used car instead of a brand new car.

2 Pay CASH

Every time you purchase something using credit cards that you cannot pay off as soon as the statement arrives, you are committing your future earnings to the credit company. Those future earnings will be needed to pay your regular household expenses, so you end up in economic slavery known as the credit trap. The exception is purchasing property that increases in value, such as buying a home or investing in a commercial building that puts more income in your pocket.

Tip: When paying with cash; negotiate a cash discount. When the economy is sliding down and credit is harder to get, the guy with the cash is king. In addition, find out how to buy wholesale instead of retail to further lower your cost.

3 Make the Money BEFORE Spending It

If there is some large purchase you need to make or want to make in the future, start putting small amounts in a savings account towards that purchase and keep that up until you have the cash to pay for it. If you have 10 years before your child enters college, then find out what the tuition will be and figure out how much you have to put away every week to have the cash the year they graduate from high school. Plus apply for every student scholarship, grant or financial aid package you can locate.

4 Stash Some Cash for Emergencies and Living Expenses

Nothing will make you sleep better at night than financial freedom of having some cash tucked away for emergencies like having to get the car repaired, needing some unexpected dental work or losing a job. When you have a cash cushion you can get your hands on immediately, then magically, you stop worrying about money, your attention goes back on living life and enjoying it, and making money suddenly gets easier.

The only thing you have to fear in an economic crisis is not having some cash reserves in a savings plan you can immediately get your hands on. Did you know that more millionaires were made during the Great Depression in the United States than during any other era in our history? How did that happen? In that time, the economy crashed, the stock market crashed, inflation took prices of everything through the roof, the unemployment rate went sky high as businesses closed, and people who lost their jobs also lost their homes.

The people who had cash stashed away were able to buy houses, property and whole companies for pennies on the dollar. They ended up being millionaires because they had enough cash to weather the storm called the Depression.

Out of every bit of income that comes in the door, immediately carve off 10% and put it in a savings account that you have designated for your cash cushion. Even if you have to work an extra job and cut expenses on top of that, JUST DO IT! As the weeks roll by youll find you sleep better at night and walk through life with a lot more confidence knowing you have achieved financial freedom and protected yourself from the economic crisis looming on the horizon.

Sandra Simmons, President of Money Management Solutions has years of experience helping business owners and individuals manage their money to reach their financial goals.