Don't Stop Saving

The Federal Reserve has recently cut the federal interest rate twice in two weeks. If you have your savings in a high-interest online savings account, you might have gotten an email detailing your new, lower interest rate. The attraction to these high-interest savings accounts is in the name: high interest.

Many online savings rates are down to around 3-4%. That's still a great rate, but not as nice as 5+% has been for the past year. You should not stop saving because you are earning less interest than you were before. 3.5% is still 3% higher than your local brick and mortar bank will give you.

However, if you are looking for a better return, now is the time to invest your new money in the market. Stocks are down and you know the rule: Buy Low.

But don't stop putting money away in your emergency fund, HDTV fund, house fund, or whatever you are using an online savings account for. Any amount of time your money isn't in your savings account, it isn't earning interest, and you aren't making any money.

Buy Low, Sell High

When stocks are low, buy. When stocks are high, sell.

Often people don't think rationally when it comes to their money. If the stock market starts to take a dive, people panic and sell. Even if it's at a loss, they will sell out of fear of losing more money.

You don't lose any money until you sell. If you have a long term buy and hold strategy then you have nothing to worry about. What you should do when the stock market falls, is buy more. The best time to buy is when everyone is selling out of fear. You can get good companies for great values because the stock price just followed the market. Once the market recovers, you will make out.

If the market is down because of an economic recession, you should buy. Again, the idea is buy and hold. Downturns and recessions are the best time to buy. The worst mistake people make when the market is down is to get out of the stock market. You want to get in while it's cheap so you can make the most return.

Spend Less than you Earn

This is quite possibly the simplest money rule of all. Unfortunately, most people don't understand this, or just plain ignore it.

There is nothing hard about this rule. Your total expenses have to be less than your total income. For example, if you make $3,000 a month, you should not be spending $5,000 a month. The goal is to build wealth, not go into debt.

People who don't follow this rule generally fall into one of these categories:

• They don't live beneath their means
• They have no idea how much they are actually spending

Live beneath your means

This is an easy fix. Stop paying for things you don't need. If you can't find any spare money to save, and always end up deeper and deeper in debt every month, then you aren't living beneath your means. 

The key is to identify the difference between wants and needs. You want a new car, but you don't need it. You want a large house, but you don't need it. You want to eat out every night, but you don't need to. Cut back on things you want but don't truly need, and you can begin to live beneath your means. If you can't seem to do this because your rent and car payments are too high, then you need to sell your car and move to a smaller place. 

Look around you and reevaluate some of your purchases. For example, if you have 100+ DVDs and a 50+ inch HDTV, yet are going deeper into debt each month, then you aren't living beneath your means. Make some life changes, and start spending less than you earn.

Tracking your spending

If you don't track what you spend money on, then it is very easy to spend more than you earn. In the past, you would have to keep receipts or a written record of all your purchases. Now, everything is electronic and online. There is no excuse to not know where all your money goes. All major credit card companies and banks have an online account where you can track all your purchases.

If you have multiple credit cards, debit cards, and checking accounts, then you can use an all in one service like Mint. This site tracks your spending for you. Being lazy isn't even an excuse to not track your spending now. When you see in a pie chart that entertainment makes up half of your expenses for example, you can start to target your spending according. 

If you start living beneath your means, and track all your spending, you will be on your way to spending less than you earn. Only then can you start putting your money to work for you to build wealth.

A Blog Simply About Money

This blog is about money.

I want to work less, and make more money. Making money, saving, and growing your wealth should not be hard. I'm going to share my insight about money as I work hard at my goals:

• Earn a higher salary
• Earn more passive income
• Save more money
• Invest more money
• Grow my wealth
• Spend money smarter

I think these are all reasonable goals. Let's get started.