Money does not make you buy that expensive coffee every morning instead of brewing it yourself – you choose to do it; money doesn’t make you go out to dinner every night instead of only on special occasions – you choose to do it; money doesn’t make you buy that car or house or pay for that vacation that you couldn’t afford – you choose to do it. What we need to do is to face reality and take back control of our money.
The way I see it, we are in a world of instant gratification where we need to have the latest and greatest right now. Most people today will procrastinate at putting away money for the future in order to get the great feeling by making some insignificant purchase today. But, it is this type of thinking that has gotten the world into the economic crisis that we are in today. This type of thinking needs to change and we need to learn to pay ourselves first and then invest this for our future.
That’s right; I said “Pay yourself first!” If you are wondering what I am talking about, I can tell you about how the US government is already a pro at this one. If you look at your paycheck, you will notice that before you even get paid, the government has already taken their part in the way of taxes. We can take a lesson from this and apply this to our own lives.
A goal to shoot for is to pay yourself at least 10% of all of the income that you receive after taxes have been taken out. This money should then be invested for your future. It is preferable to have this money automatically come out of your paycheck and go directly into an investment account, so that you are not tempted to spend it.
Now, I know, you are probably saying, “I can’t afford to do that! I am already living from paycheck to paycheck!”
The truth is you have to do something differently or you will have the same struggles for the rest of your life.
The good news is that I have narrowed it down to two options. The bad news is that you either you are going to have to live below your current means or you have to find a way to raise your means.
Live below your means
As far as living below your means is concerned, if you are going to invest 10 percent of your earnings, you are going to have to be able to live on 10 percent less money. If you are one of those people that can live on 10% less money right away, good for you, but chances are you are going to need to follow a plan to gradually get to 10%.
Darren Hardy in his book The Compound Effect tells how he helped his assistant making $40,000 a year gradually work up to saving 10 percent of everything she earned. First, he had her track all of her spending in a notebook and to open a separate savings account with only $33 – 1 percent of her existing monthly income. Then he showed her how to live on $33 less a month, by simply suggesting that she pack her own lunch one day a week instead of ordering from the deli that day. The next month he had her save $67 or 2%. She saved the additional money by changing her cable subscription. The next month she cancelled her People subscription. The next month, instead of going to Starbucks twice a week, she decided to buy Starbucks beans and brew her own coffee. By the end of the year she was saving 10 percent of every dollar she earned and not noticing a significant impact on her lifestyle since the change was so gradual.
Raise your means
If living below your means is not something that will work for you, then you may need to face reality that you will just need to make more money or raise your means. Some of the options you have is that you can choose to start a business on the side, find a new job, or even take on a second or third job. This way you will have extra income that you can now start investing for your future.
Robert T. Kiyosaki in his book Increase Your Financial IQ went to the extreme and hired a bookkeeper to take 10 percent of all income off the top, as an expense, and put that money in the asset column. So, if he had $1000 income and $1500 in expenses, the bookkeeper was to take 10 percent of the $1000, and put that money in the asset column. With the remaining $900, she was to pay the $1500 expenses. Robert had to teach the bookkeeper to change her way of thinking. She, like most others, paid everyone else first and herself last. Since there was rarely anything left over, she paid herself nothing. Basically, her creditors, the government, and bankers were all more important than her. The changing the bookkeeper’s paradigm left Robert as much as $4000 short some months. However, this “I am more important than my creditors attitude” lit a fire under him and he was able to make more money to eventually pay off all of the people he owed, while still being able to invest for his future all the while.
Remember, it only takes is a slight adjustment in the way you look at things to become financially successful. Look at yourself as the one in command - not your money. Look at yourself as most important - not your creditors. I hope this new way of thinking will empower you to put money back in its place and for you to take control of your money.
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