How to manage your money and become rich

If you want to be rich then there are just two things you need to do earn more and spend less and unfortunately the latter is a struggle for many people what we all intend on saving more money the reality is that it's never been easier to spend with the simple top of your credit card you can make your hard-earned savings disappear in a ninstant allowing your financial struggles to perpetuate but boss in this. I will share with you three things that are keeping you broke so that you can start saving more and unlock your true wealth building potential for more life-changing content more than a hundred years ago Italian economis vilfredo pareto came across a surprising observation while conducting a study her ealized that 80% of Italy's land was owned by 20% of the population now basedon this sole instance you wouldn't think much of this pattern however over time this same phenomenon has come up time and again for instance 80 percent of traffic occurs on 20% of roads and 80 percent of business revenues comes from just 20% of clients it's been observed time and again that 20% of an input generally produces 80 percent of total output.

And when put in the context of saving this is especially true you see when people begin their money savings journey they often focus on the wrong things for instance they cut out their$10 Netflix subscription or the handful of coffees they buy from Starbucks a month and while these efforts do help save money they are barely moving the needle lending from the 80/20 principle otherwise known as the Pareto principle.

I think it's worth asking what 20 percent of my costs are taking up 80 percent of my monthly budget this is the question we're going to answer in this and by finding ways to reduce your major expenses you will soon start to see your savings efforts skyrocket it turns out every year the Bureau of Labor Statistics runs at the three least costly expenses for the average American were life insurance clothing and entertainment which supports the fact that cutting out adrink or two a month is I'm gonna have you rolling in cash the three most costly expenses identified in the study were housing at 37%transportation at 18% and food at 14% when you send these together.

You can see that it doesn't quite equal 80 percent but it's close enough to support that generally a few inputs result in the majority of the output which in this case are your total expenses another interesting data point from the study i show much the average American saves on a monthly basis we already identified that the major three expenses of housing transportation and food.

Which I refer to as the three majors make up 69 percent of total monthly costs but out of total income available only four percent of it was being put towards savings this meansit will take the average person twenty five years to save just one year's worth of their spending even on a salary of $100,000 a year this is the savings of just four thousand dollars which means you're one broken appliance or carre pair away from saving nothing for the year so obviously it's important toincrease that savings rate as much as you reasonably can and the truth is that you will make the biggest savings impact by reducing your monthly cost relati nto the three majors of housing transportation and food let's break downways you can achieve just that by analyzing typical spending behaviorsrelated to these costly monthly expenses number one housing making up 37% of the average.

Americans monthly costs:

Americans monthly costs this expense category offers the biggest opportunity for increasing your savings however unlike more trivial spending categories like entertainment and clothing hosting isn't a cost you can eliminate completely it's for this reason that you need to be smart aboutyour housing decisions but before we can get into how you can reduce this expense let's look at why housing tends to make up a large portion of the average person's budget you see whether it's your first ever home or your dream property many people get sucked into buying more house than they need or more accurately can afford well it might seem like common sense to buy a property thatis within your budget why then do we see so many people struggling to cover their housing costs each and every month in the Western world our material possessions have transcended their functional purpose and have now become a reflection of our personalitie sand ultimately our value in society on a modest home and people will look at you as an underachiever but on the biggest home on your street and all of a sudden you were perceived as a success sadly many people can't fight  enthralled in showing off their wonderful property to their family and friends that they don't even consider how they will maintain the property.

When they finally get the keys however things weren't always like this the average home size in the 1950s was just nine hundred and eighty-three square feet and is now more than tripled to nearly three thousand square feet what's worse is that on average 68% of a typical house goes totally unused meaning that the majority of your house isn't unneeded cost and the act of purchasing a bigger home doesn't just mean larger mortgage payments as you can imagine it increases all of your costs Ohio your property taxbill a larger utility cost and much more for maintaining the house and the culmination of all these costs is exactly why most people are spendingu pwards of 40% of their monthly income on housing so if you find you r self taking on a larger housing expens come rule is a great rule of thumb to follow and it states that you should notbuy a property that is any more than three times your annual income but just to be sure you can afford it I would suggest you do some quick math on what your living cost would look like if you were to buy.

 that property now if you were renting the obvious thing to do is look for a cheaper place even when renting all too often people get sucked into taking on at least they can afford because they want to have a fully upgraded apartment or have one locatedin the best area of town well it's nice to have a high-end living quarters the benefit needs to be balanced with how much it will support you reaching your financial goals finally if you already own a home it's worth thinking about whether you can use your property to offset some of your current living costs as I just highlighted 68% of a typical house goes unused and if this includes abed room then you're in luck taking on a 10or offering up a room on Airbnb can make you hundreds of dollars a month which one used to offset your housing costs can substantially add to your ability to save number two transportation now we already know a lot of people are overs pending on their homes.

But when it comes to cars the situation is evenworse recent studies show that the averag eperson spends over four times more in their cars than their personal savings it's no wonder transportation makes up the second largest monthly expenditure for most people sitting at roughly 18% but there is a silver lining vehicle spending is far and away the easiest category to control with today's vehicles easily losting a hundred thousand miles and some reliable brand soften hitting 250 thousand miles with basic maintenance saving money in your cars is easier than you suspect now like housing there are a few ways you can lower your monthly transportation cost with the first being to buy a car you can afford.

What I recommend is to follow the 2410 rule when deciding on which carto buy this rule states that you should put down at least 20%also you should finance the car for no more than four years and most  importantly spend no more than 10 percent of your monthly gross income on transportation costs another way to keep your transportation costs low is to pay cash and for some people this means buying used the strategy is great for a few reasons first paying cash allows you to avoid paying interest on the purchase which is quite literally wasted money second paying cash means no car pay ments so each month your beloved car stays on the road.

It is essentially writing you a  check for $500 which is the average price of a new car payment these days however the best way to reduce your monthly transportation costs is to no drive at all taking public transit walking or working from home can allsave you a lot of money and in many cases can help you get in some extra exercise at the same time therefore there are numerous ways to reduce you transportation costs if you are willing to give up a bit of communions number three food the final cost in the three majors making up 14 percent of most people's monthly bills is food and like housing it obviously can't be completely avoided but the potential for reducing its impact during your monthly budget sir exists the average consumer spend sroughly $500 a month on food and this includes both groceries and going out toeat the average.


 American eats 4.2 commercially prepared meals per week which equates to eighteen point two meals in the average month eaten outside the home for the average person this habit of eating out costs them two hundred and thirty-two dollars a month or twelve dollars and seventy five centsper outing now I would argue that most meals cooked at home would cost no more than five dollars each which means that eating in more will significantly reduce your food costs for the month.

The other way to lower your food bills is to analyze how much food you waste as the 2018 Americans were throwing out roughly  twelve-inch dollars worth of food a year in order to combat food waste make sureto always plan out your shopping trips by listing out only the items you will definitely use and then stick to your list when you arrive at the store just these two changes alone can take the average $500 monthly food bill down closer to $300 which if you ask me is a much more reasonable amount to bes pending one thing.

Oh a lot is that you should not dramatically reduce the quality of your diet just to save a few bucks without good health the amount of money you save is irrelevant so ensure you continue to buy healthy foods when working on cutting your grocery bill so as you can see when it comes to saving money some efforts will be more fruitful than others sure cutting out expensive coffees that you buy from time to time won't hurt your savings efforts butfo cusing on reducing the costs associated with the three majors housing transportation and food you will be sure to see your bank balance rise over time thanks.