I had no cash savings

I started my process because, while I had tons of savings in my retirement accounts, I had essentially had no savings that I could use today if I needed to. If something came up, an emergency, or I wanted to buy a car…I had no cash or investments that I could use. The retirement accounts are tax deferred, you can’t spend those today (unless you pay a penalty), so I needed to save and invest to accumulate enough of a financial cushion in “taxable” accounts.

That was my primary goal: Save and invest my way towards having a substantial sum of money that I could use whenever and for whatever I wanted.

But I had questions that I needed to figure out and answer:

• How much should I save each week, two weeks, each month?
• How would I do that?
• What would my ultimate goal be as far as how much money I should have?
• What would my timeline be after one year? Two years? Four years?

Step 1: How much to save every two weeks

I set out to decide how much I should save. I looked at my expenses, how much my wife and I were getting paid every two weeks (the net amount… the amount that actually hits your bank account, not the gross). It felt like it was very hard to find ways to scrape together enough money to make it happen though.

Through much my adult life, it seemed like there was never enough money left over to save in a cash/investment account. It just always seemed like building up substantial savings was always something I would do in the future. The pressing needs of expenses seemed to rule the day to day and setting cash aside for a rainy day, an emergency, a vacation, a new car…never seemed to happen.

I decided that I had to find a way and just do it.

There were some areas where I could actually reduce our current spending to free up enough money that could be set aside and saved and invested

A major one was groceries. We have 3 boys, so it is 5 of us in the household. We were shopping at Wegman’s, a top-tier grocery store that bottom line…was super expensive. We also shopped at Giant and Safeway…they are less expensive, but not super-cheap either. I decided to check out Walmart’s grocery section. It was amazing how much cheaper it was. I ended up saving $80 a week, simply by going to Walmart! Just by shopping there, $80/week x 4 weeks in a month is $320/month in savings.

The miscellaneous spending. We made a conscious effort to cut down on the miscellaneous spending that we knew we were doing. These are the expenses where it was hard to put a finger on, they seemed small at the time…but added up to a decent amount each month. Stuff like buying dinner for the kids when we were too tired to cook, or buying lunch 1 day of the week during our workday, or buying something off of Amazon that would be “nice to have”, but not essential. After looking at prior months, it appeared that another $160/month was being “wasted” on crap that we really didn’t need to be spending money on.

I arrived at a number to save every two weeks: $240

That’s $480 a month. Which is $5,760 a year.

By making what seemed like relatively small changes and without sacrificing too much, we would be able to set aside almost $6,000 a year.

I needed to figure out how much I could save, because that then determines what your final goal should be. If I arbitrarily have a goal of having $1,000,000 in 4 years…is that realistic on my budget? Most likely not. So you need to work through the process by first figuring out what you can save.

Step 2 – Based on my savings rate, what should my goal be?

We all have set goals in the past. I know I had. Some of them I achieved. Some of them I didn’t. It turns out that there are reasons why some goals aren’t achieved and some are. Below are the important points when setting goals.

• A good goal has a specific timeline. A date in the future where it will be achieved.
• A good goal has to be very specific
• A good goal has actionable steps that you can control
• A goal has to be somewhat realistic, but also scare you a little bit at the same time.

A) Timeline – figuring out how much time it will take to reach your goal

So I sat down to work a timeline out.

First, I knew I would able to save $5,760 a year. That would be $11,760 that I saved after two years, $17,280 saved after 3 years and $23,040 saved after 4 years.

I decided on 4 years. That is because it was a good bit down the road in the future, but not too far off that it didn’t seem close enough for it to be meaningful for me. for instance, my retirement accounts that I mentioned…while they are nice, they just don’t seem as meaningful to me because retirement seems so far away in the future!

So that means I would have set aside $23,040 over the course of those 4 years. That is how much I would be saving…remember, I wanted to invest and grow that amount using the system I’ve described to you so far.

B) Next question: How much money would I want to have after 4 years?

I knew I wanted to be aggressive with my investing. I am in my 40’s and I had no savings for a rainy day, money that I could spend right now if I needed to. I had some catching up to do. I needed to be aggressive, but smart.

The first year, my base capital would be about $6,000, the second year, $12,000, the third year around $18,000 and then the fourth year around $24,000.

After calculating the percentages that I thought I could make, I came up with an audacious goal that I thought was realistic, but quite a stretch. A number that was meaningful to me and simple…

I came up with a number: $100,000.

I wanted to have $100,000 after 4 years.

That was a bold goal, but something I thought I could achieve.

C) Next question: What steps would I need take to to reach this goal?

Ok, so I knew I was going to save $240 every two weeks, which is $480 a month. I decided that I could either have the money deducted from my checking account every two weeks or deducted from my paycheck.

It turns out, my employer had a stock purchase plan. I would be able to buy the company stock (I worked for a huge, stable company who’s stock had been in a nice uptrend), at a 10% discount to the market price with each purchase. Here I was going to be ahead by 10%, right off the bat! Or you could look at it this way – I would be able to buy more than 10% more shares than I normally would.

In any case, I decided initially to have $240 deducted from my semi-weekly paycheck and moved into the stock purchase plan. It was a start. Did I intend to always keep my money in that company stock? No. I planned to sell at some point in the future and start investing in my strategy that I have highlighted in this series of posts.

So the action(s) I took was to get the stock purchase plan setup, let it automate for some time and then plan to start diversifying into other investments as the account grew. During that time, I thought through my strategy to invest those funds. I spent time each week figuring out exactly what I would do when it came time to sell that company stock and follow through on that strategy.

A few tips related to goals

Tip 1: Never leave the scene of a decision without taking immediate action

I’ve read a lot of self-help, self-improvement books. One of the key points that seems to be spread across all of them is taking action. You have to take action. After all, how will you reach your goal unless you take steps towards them?

So a huge tip after you have decided what you want in the future and you have worked out your goal… is to take action immediately.

Maybe that first step is a phone call. Maybe it is figuring out how to setup the way you will set your savings aside. Setting up a Robinhood account. Whatever…you have to take immediate action. That feels good. Trust me!

Tip 2: Work the timeline backwards, breaking the big goal into smaller goals.

My ultimate goal was $100,000 in 4 years. How much would I have after 3 years, 2 years, in 1 year. For instance, when I first setup my goal, I took immediate action that day. I figured out that I was going to use my company’s stock purchase plan…so that’s what I did, I got the plan setup, configured the payroll deduction.

I knew I needed to do research and develop an investment method or system for when I branched out of the company stock at some point in the future. More intermediate goals right there! I spent time writing out my system, what software tools would I use to find stocks to invest in. What types of stocks would I invest in. I figured out a game plan on when to sell a stock. Would I use just fundamental analysis? Technical? These are all steps that I set into a timeline that I knew I needed to take to reach my ultimate goals within that timeline.

This way, you aren’t daunted by this huge goal that seems far off, well out of reach and almost impossible. By taking action each day, each week…having milestones to reach by the end of the month…it is amazing how quickly you will get to where you want to be!

I happened for me.

Make the commitment today. Figure out your goals. Go through the steps. Take action.

I started with $240 every two weeks

That might seem like a lot to you. Maybe it doesn’t. It doesn’t matter. The concept holds true. Setting aside the same amount of money and investing that same amount again…and again…and again produces amazing results.

When you have nothing, it’s the only choice you had. I know that firsthand.

It also has some amazing benefits. Dollar cost averaging….investing the same amount of a consistent schedule.

Let’s talk about why this will help you achieve your goals.

Part 6 – Dollar Cost Averaging

P.S. – Get Tips on the Free filtering tool I use