I have had two friends contact me in the last week about saving money. Tends to happen just after the Christmas period!

One friend is trying to pay back a student loan and the other is trying to save for a deposit.

When I was 20 I graduated from university with a $30,000 debt and paid it back in less than 2 years, earning a modest straight-out-of-Uni income, but following a strict and disciplined method.

As Robert Kiyosaki wrote in Rich Dad Poor Dad, this was a ‘bad debt’ that I needed to free myself from.

When I was 22 I purchased first investment property using a $25,000 deposit I had saved using the same method.

When I was 25 I purchased my own home with a $120,000 deposit that I had managed to save in a three-year period. Again, same method.

So I was happy to share with my friends the methods I use which have worked for me.

Shout out: my mentor gave me a book called The Richest Man in Babylon when I was 20 – my method is largely based on that book if you want to read more!

My method:

1. I live within my means – I do not live off more than 50% of my weekly paycheck.

a. I was taking home $960 after tax when I was 20. After rent, electricity, gas, groceries, internet, fuel, etc. (there was no Spotify or Netflix back then, but they should slot in here too) I was left with $200.
b. I drew out the $200 every Friday in cash and had to make sure it lasted me until the following Friday – if I wanted to eat out, party with friends, drink espresso coffees, it had to come out of this cash. Once it was gone, it was gone.

Shout out: the cash part of this method came from a second mentor and was/is invaluable!

2. The other 50% is paid as follows:

a. 40% against my loan or into a separate bank account (when I was saving a deposit). I did not have a card for the savings account, and I did not set up internet banking. It was impossible to access if I was out on a Saturday night and had spent my $200 spending money already!
b. 10% into a separate bank account – for this one I set up internet banking but no card. It was for the lump sum annual bills (car insurance, rego, health insurance, etc) and an end of year holiday.

3. I paid my lump sum annual bills in August each year. This gave me enough time to lodge my tax returns promptly, and then use any tax refunds to pay car insurance, registration, health insurance, etc. so that I could maximize my end of year holiday fund!

4. I worked my butt off, often 12 hours a day, so I could take on more responsibility and duties at work and therefore increase my income. I never waited for the raise to work harder, I worked harder and then earned the raise; it usually came without me even needing to ask for it!

This method helped me become free of bad debt, then build up my savings.

All the while I was able to take 2-3 week overseas holidays each year in the process!

My income has increased since then but I still use the same methods. I have actually managed to keep my expenses in check while my income has grown and manage to live off less a little less than 50% of my weekly paycheck today.

You should start your debt reduction or savings plan by understanding where you spend your money, and then go from there.

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