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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 laid out how he managed to accomplish the staggering feat of saving 73% of his annual income.
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Here are the seven strategies that, collectively, allowed Chan to save 73% of his income and live a financially prosperous lifestyle.
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Applying the Pareto Principle
The Pareto Principle is a concept in which for many outcomes, about 80% of the consequences come from about 20% of the causes. Chan uses his daily to-do list as an example. He said he accomplishes 80% of it in the first 20% of his day, when he’s more productive.
Chan said the same principle can be applied to finances. Essentially, 80% of your total expenses likely come from only 20% of your expense categories — such as bills, rent and, say, dining out. As such, if you focus on cutting down the expenditures in those categories, you can reduce the 80% you’re currently contributing to them, allowing you to save money.
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Spending Money
It might sound like a cliché, but sometimes you have to spend money to save money. As Chan noted, when he began video blogging about finance, he was doing all the work himself and effectively running himself ragged by performing all the tasks himself. Eventually, he hired and paid for a video editor, which freed him up for more big-picture tasks and allowed him to make even more money.
“There are only two ways you can make more money. One, you can either trade your time for money, or two, you can trade money for time,” he said.
Creating Habits To Save
Beginning to save money can be a tough habit to form, but doing so will allow to you build wealth over time. Chan recommended having someone in your life who holds you accountable, as well as having a structured step-by-step road map that works for you and your lifestyle.
Using the TG Strategy
This unique finance strategy might just help you preserve more and more of your income. As Chan explained, TG is an acronym, with the T standing for tracking expenses and budgeting and the G standing for goals.
In Chan’s case, he set a goal of building an eight-month cash buffer so he could quit his full-time job and work on bettering his life. Then, he tracked his expenses and his budgets so he could save the money necessary to do so.
“Just having a financial goal alone is going to set you ahead of a lot of people because it forces you to switch your mindset from short-term thinking to long-term thinking,” Chan said. “And since I had a specific number in mind, I was able to break it down into manageable steps, with monthly, weekly and daily savings goals.”
Applying Parkinson’s Law
Parkinson’s law is a psychological concept that states that work expands to fill all available time, Chan explained. This means if you have a goal with a due date, you will fill time procrastinating until the project is due. Chan warned that the same applies to spending.
Often, our spending will expand to fill all available money that we have. The more money we make, the more we spend. Chan warned against such lifestyle inflation. Keep your budget rigid, even as you make more. Chan explained that he forces himself to think he earned less than he actually did, allowing him to save more and spend less.
Doing a Quarterly Review
At the end of every fiscal quarter, you’d be well served to review your personal finances and monitor how you’ve been doing, what you did well and what you could improve on. Doing so on a quarter-by-quarter basis allows you to make any necessary changes to your finances.
“Once I have a holistic picture of my quarterly spend, I’ll have some key takeaways … There’s nothing like seeing the evidence of your spending in front of you to force you to question it,” Chan said.
Identifying the Trigger Rule
This rule states that you need to identify the thing in your life that triggers you to spend money. Do you mindlessly buy things when you’re bored or overwhelmed? It would serve your finances to locate what drives you to overspend and cut those triggers from your life.
Each of these strategies can help you cut overspending and preserve your income. Employ them all, as Chan did, and you might be able to keep 73% of your overall income too.
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This article originally appeared on GOBankingRates.com: 7 Strategies Financial Influencer Vincent Chan Used To Save 73% of His Income
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