There aren’t many people in the world who don’t like the idea of being rich. I mean what’s not to like? Regardless of what you’re into, I think it’s fair to say everybody would like a nice house, car, an overseas holiday (remember that?) and the luxury of eating out at nice restaurants. We see all our favorite celebrities and influencers make it look so easy right?
But like most things in life, there is always a catch and in this instance, the catch is we only see the effect and not the cause. Now not everyone works hard to make money and some people come into it quite easily, but if you look at the vast majority of people who you would consider successful, they usually have a lot in common.
In essence, most successful people create cash flow first. With that cash flow they pay their living expenses and retain as much as possible and then use that surplus to invest into other areas to create more cash flow. Those areas include businesses, stocks, real estate - pick your poison. All can be great ways to create more cash flow.
But first and foremost you need cash flow. For most that is from their job. Now unless you can increase the cash flow (by getting a pay rise for example), you have a finite amount of funds to work with. If you spend all of your money on living expenses, recreation and luxuries you’re not leaving any room for making more cash flow and you are not following the habits of the rich.
Success leaves clues and while the past may not always be an indicator of the future, this is a tried and tested method for building wealth, so should certainly not be taken lightly. So, now that we know the importance of retaining some of your income, or saving as it is more commonly known, we can look at ways to help achieve this all important goal.
For me personally, I was wired this way from day one and started from my very first pay check. But I have spoken to many friends along the way and suggested some small and easy tips to help if you are not this way inclined.
The first would be to set up a separate account which you do not have a debit or access card to. Treat it as a monthly bill like any other you have and transfer the money by a due date, best would be the day you get paid. The mentality, is to approach this account as if it’s not your money. There is no acceptable reason for you to touch this money unless it is life or death. This may seem extreme, but if you have this approach, you won’t use it and if you really do need some funds but it isn’t life or death, you will find other ways to make the money and not eat into your wealth.
Another great way to save is to flip the order in which income and savings is usually viewed. Most people spend what they make and save what is left over. I have always saved everything and then spent what I need. This is a simple but powerful way to approach your wealth and respect your money.
Continuing on the mentality path, another approach in regards to luxuries and recreation is to view prices in terms of your hourly or daily income rate. $300 for a pair of shoes may not seem like much in comparison to other items, but if it takes you 2 whole days of hard work to earn that $300, it might change your perception.
When you think about how much work goes into the money you earn, it places perspective on how easy it should be to let it go. A good rule of thumb is to spend 10% or less of your income on luxuries per year, most would spend much more than this.
As you can see, nothing here is ground breaking. You don’t need a degree in finance and you certainly don’t need a spreadsheet. All you need to do is let less money leave your account than comes in. The common theme though, is your mentality. You have to think and act like a rich person to become rich. Most people already do this except they think like a rich person after they are rich. You need to do what they did to get there first. I believe this is the first step to achieving it.
Happy saving.
I needed this! Thank you!