Saving is a big knowledge to financial freedom. My mother always tells me that the one who knows saving money is the one who will become rich. That is true. I meet many people who are earning a large sum of money but they are not rich finally. You may think saving is easy, but when you take a look at the saving rate in America, you may change your mind.
The saving rate in America as low as below 1%. The low saving rate means that you have to work forever for food. Why the saving is so low? The reason has been pointed out by Frank and Muriel Newman. The key is the concept of saving. Many people save their money after their spending. This is wrong. You should use only the money after your saving.
It may be difficult for you to consciously save part of your salary every month. One way to help you save your money is the auto investment plan from the bank. Such scheme usually deducts a fixed amount of your salary on the first few days of the month. Therefore, before you have used up your money for food and clothes, it has become part of your investment.
You may doubt about the possibility of financial freedom by just saving a part of your money every month as investment. Then, you may need to know the power of “compound”. For example, assuming you have $100 investment every month at a 5% return rate. In half a year of time, your total investment is not just $100 x 6 months x 105%. You can get around 8% more because of the compound effect. The principle and return from the first month together become the principle in the second month. When this principle and return relationship keeps on for 20 to 30 years, you are going to have a large sum of money.
The other thing that you have to learn for saving is control. You must learn how to control your spontaneous possessive desire. Most of the people go into financial problem because they fail to control their desire. This is especially important to those who love to use credit card as their payment method. The interest rate charged by credit card is extremely high. Once you default the payment, your interest is also counted with the compound method.
Finally, you have to monitor your financial status. When you know your financial status, you will do everything to help yourself escape from the financial problem. Also, you are going to find new ways that will improve your financial status.