MT2 | Don’t Give Up On Your Artisanal Coffee (Yet)

People say it’s always hardest to make the first $100, the first $1000, the first ten thousand, the first million. But why do they say that? Well, mostly because it sounds catchy! But it’s true. For one, if you learn how to make a hundred you can make the next hundred much easier by just re-applying that knowledge. And the first hundred could earn interest and even give you a head start on the second hundred for free.

So you need to have money to make money. But does that mean you’re doomed if you have nothing? Nope – everyone had to start somewhere. Oprah Winfrey started poor, and so did Howard Schultz of Starbucks. Back in India, Dhirubhai Ambani started Reliance with just a few thousand rupees and so did Narayana Murthy of Infosys. Even Vijay Mallya of Kingfisher started with just a few rupees.

Oh wait, no that was how he ended. Sorry!

If you’ve only recently started thinking about your money, you might have nothing yet, or maybe only a little. And that’s no problem – as long as you can save more every month. The real question is – how much should you save?

Discussion Topics: Don’t Give Up On Your Artisanal Coffee (Yet)

• The 20% Rule
• The Half-Your-Age Rule
• Save on the boring stuff
• Pay yourself first
• Consolidate expensive debt into cheaper loans

Transcripts: Don’t Give Up On Your Artisanal Coffee (Yet)

Hi, everyone, welcome to another episode of MoneyTok, where we help make personal finance and investing simple and accessible through both my own experience. I’ve been doing this for about 20 years now. This show is about money and wealth creation. And we talk about so many ways of making money, bought retirement planning about stocks, bonds, gold, real estate, crypto, and so many kinds of things.

The 20% Rule

Also called the 50-30-20 rule, this guideline indicates that you should spend 50% of your post-tax, net income on essentials like food and rent and another 30% on socialising and funding stuff. The remaining 20% should be set aside for savings as an investment and not touched for any purpose, including vacations or other one-off spending.

The Half-Your-Age Rule

The reality of life is that given big-city rent, loan repayments, and the high chance that you spent like a drunk sailor on your first credit card, you may not be even close to saving 20% when you first start working. On the other hand, if you’ve been at work for a few years (or decades), or perhaps dove headfirst into an investment bank or a unicorn tech startup straight out of school, 20% might well be too little. So a better way to determine the ideal saving rate is to base it on half your age. So, if you’re 20, save 10%, if you’re 30, save 15%, if you’re 50, save 25%.

Save on the boring stuff

You don’t have to give up your little joys, like that amazing coffee. Focus on the boring stuff instead, like your cell phone, cable, transport, and subscriptions. And do ask your friends to match donations on your birthday or on special occasions, rather than buying you stuff you don’t need and wasting money that could be put to better use.

Try the simple cheat sheet we have on the CrazyTok Resources page to list out all the boring stuff you could save on right away! To protect your privacy, the template itself is not editable. Please make a copy for your personal use.

Pay yourself first

To get results, you need discipline. You need to pay yourself first – or more accurately, you need to pay your future self first. I recommend opening a separate savings account preferably in a form that doesn’t allow easy withdrawal. Or just don’t activate the ATM or debit card so the only way you can get your money is by cashing a cheque. And then set up a recurring deposit that sweeps money from your salary account into this one right the day after you get paid. And every time you get a bit extra, like a bonus or a pay hike, increase your contribution to this savings account.

Consolidate expensive debt into cheaper loans

You can further reduce your costs by consolidating higher-cost loans into lower-cost loans. For example, you could take a lower-interest personal loan or maybe even borrow against your home equity to pay off higher-interest credit card bills. This will reduce your overall loan servicing costs dramatically.

Second, you could accelerate payments on the highest-cost debt before the others. It may seem tempting to pay off the largest loans – like maybe a mortgage – but you should instead pay off the most expensive loans.

And I do hope you will subscribe to MoneyTok to get this and many other real-life insights!