Saving money is the #1 item on your million dollar plan. For some, a savings plan is actually the only item on their plan: if you devise it carefully and execute it with discipline and persistence, it will eventually get you to a million dollars and beyond. This is the good old "get-rich-slow" method, and it really works for all of us, even if it may take decades of time and boatloads of patience and discipline.
Luckily, saving money does not have to be the only step in your plan. There are supplementary activities that can make the progress much faster and more palatable for us mere mortals. Yet, devising a plan for continually accumulating savings will set your up for success. It will build that all-important defense part of your plan, providing fuel for your journey to million dollars and ensuring that your hard-earned gains will become permanent.
Your savings plan should start from a simple mapping of your income. If you are like most of us, you will have a regular salary that is your main source of regular income. This is already great - earning money from a job is an excellent starting point! Additionally you may have other regular or irregular streams of income. Make sure to list them all separately, including the amounts, and keep the regular income items separate from the irregular ones. This way you will know how much money exactly you earn in each month. For irregular incomes you can either use a monthly average for them, or you can make a separate total income calculation for each month of the year, if you prefer.
Next, estimate all your expenses - both the regular and irregular ones: food, beverages, clothing, utility bills, car related and/or other transportation costs, telecom costs, school fees, cost of eating out, cost of vacation trips, etc. Start with the necessities, and move on towards the more discretionary items. Be as realistic as you can in order to have reliable estimates for later uses. Again, make sure to list all major item separately, including the amounts, keep the regular expense items separate from the irregular ones, and use either averages or separate monthly calculations for the irregular items.
Once you have listed all your income and expense items, you are ready to make your savings plan. Your first cut could be as simple as this: just deduct all the monthly expenses from your monthly income items - month by month, if you made a separate plan for each month of the year. This way, you will have a simple monthly estimate for the amount that you'll be able to save. While this is a good start, I recommend you to take a step further and use budgeting to set goals for your regular savings plan.
Through all this, you achieve three excellent first steps towards your financial independence. First, you will get a clear understanding of your income and expenses. Second, you will also learn how much you are currently able to save and thus invest on a regular basis. Third, you will start to notice what you could and should do to increase your regular savings that you can invest. This last point is especially important: the more you can save, the better, as these savings are the money you will invest in order to power your million dollar journey. Later on, your investments will become an additional - or eventually the principal - source of "rocket fuel" for this journey. Yet, when you are just staring, your regular savings are really what makes all the difference.
Now that you have made your savings plan, you are ready to move on to make your investment plan - in a few days you can click here to find out more. Before this, though, here's more on why investments matter.