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Vincent Chan is an internet personality and financial influencer who educates his followers on how to build wealth. In a recent video, he explained how he achieved the incredible feat of saving 73% of his annual salary.
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Here, Chan has compiled seven strategies that have enabled him to save 73% of his income and live a financially prosperous lifestyle.
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Applying the Pareto Principle
The Pareto Principle is the concept that for most effects, about 80% of the effects result from about 20% of the causes. Chan uses a daily to-do list as an example. He says that 80% of your productivity is achieved in the first 20% of your day.
Chan said the same principle can be applied to finances. Basically, 80% of your total expenses are likely to come from just 20% of your spending categories, such as bills, rent, and eating out. So, if you focus on reducing your spending in these categories, you can cut 80% of what you currently spend on these categories and save money.
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pocket money
It may sound like a cliché, but sometimes you have to spend money to save money. As Mr. Chan pointed out, when he started his financial video blog, he did all the work himself and was essentially making a dent in himself by doing all the tasks himself. Eventually, he was able to hire and pay for a video editor, allowing him to focus on bigger jobs and make even more money.
“There are only two ways to make more money. The first is that you can trade time for money, and the second is that you can trade money for time,” he said.
create a habit of saving
Starting to save money can be a difficult habit, but it can help you build wealth over time. Chan recommended having someone take responsibility for your life and systematically creating a step-by-step roadmap that works for you and your lifestyle.
Using TG strategies
This unique financial strategy may help you keep more of your income. As Chan explained, TG is an acronym, where the T stands for expense tracking and budgeting and the G stands for goals.
In Chan’s case, she set a goal to build an eight-month cash buffer so she could quit her full-time job and work on improving her life. Next, I tracked my expenses and budget so I could save the money I needed to do so.
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“Just having financial goals can put you ahead of a lot of people, because you have to switch your mindset from a short-term mindset to a long-term mindset,” Chan says. “Because I had specific numbers in mind, I was able to set monthly, weekly, and daily savings goals and break them down into manageable steps.”
Application of Parkinson’s Law
Parkinson’s Law is a psychological concept in which work expands to fill all available time, Chan explained. This means that if you have a goal that has a deadline, you will end up procrastinating until the project is due to fill the time. Chan warned the same goes for spending.
Often our spending expands to fill all the available money we have. The more money you have, the more you spend. Chan warned against this lifestyle inflation. Even as your income increases, keep a strict budget. Chan explained that people trick themselves into thinking their income is less than it actually is, allowing them to save more and spend less.
Conduct a quarterly review
At the end of each fiscal quarter, it’s a good idea to review your financial situation and monitor what you’ve done so far, what went well, and what could be improved. By doing this quarterly, you can make any necessary changes to your finances.
“Having a complete picture of your quarterly spending can give you some important takeaways. There’s nothing more fun than seeing the evidence of your spending right in front of you and making you question it,” Chan said.
Identifying trigger rules
This rule states that you need to identify the things in your life that trigger you to spend money. Do you mindlessly buy things when you’re bored or overwhelmed? Identifying the causes of overspending and eliminating them from your life can help your finances.
Each of these strategies can help you reduce excessive spending and preserve your income. If you hired everyone like Chang, you might be able to keep 73% of your overall income.
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This article originally appeared on GOBankingRates.com: 7 Strategies Financial Influencer Vincent Chan Used to Save 73% of His Income
