After you pay your fair share of taxes, you must learn to live on seventy percent of your after-tax income. This is important because of the way you'll allocate your remaining thirty percent. The seventy percent you will spend on necessities and luxuries. Always remember though, we must teach our children not to spend their money a dollar at a time. If you spend your money a dollar at a time, you’ll wind up with trinkets instead of treasures. You can’t buy much of value a dollar at a time. The thirty percent? Let's allocate it in the following ways:
Of the thirty percent not spent, one-third should go to charity. Charity is the act of giving back to the community that which you have received in order to help those who need assistance. I believe that contributing ten percent of your after-tax income is a good amount to strive for. (You may choose a larger or smaller amount -- it's your plan.)
The act of giving should be taught early in life. The best time to teach a child the act of charity is when he gets his first dollar. Take him on a visual tour. Take him on a tour of a place where people are truly helpless so that he learns compassion. If a child understands, he won't have any trouble parting with a dime. Children have big hearts.
There is another reason why the act of giving should be taught early and when the amounts are small: It's pretty easy to take a dime out of a dollar. But it's considerably harder to give away a hundred thousand dollars out of a million. You say, "Oh, if I had a million I'd have no trouble giving a hundred thousand." I'm not so sure. A hundred thousand is a lot of money. We'd better start you early so you'll develop the habit before the big money comes your way.
2) Capital Investment - Money that you let someone else use to make money off it (passive capital - i.e stocks, shares, investments into other businesses that you are not involved with)
With your next ten percent of your after-tax income you're going to create wealth. This is money you'll use to buy, fix, manufacture, or sell. The key is to engage in commerce, even if only on a part-time basis.
So how do you go about creating wealth with the ten percent of your income you set aside for that purpose? There are lots of ways. Let your imagination roam. Take a close look at those skills you developed at work or through your hobbies; you may be able to convert these into a profitable enterprise.
In addition, you can also learn to buy a product at wholesale and sell it for retail. Or you can purchase a piece of property and improve it. And if you're fortunate enough to work at a place where you're rewarded for additional productivity, you can work for more income and use this income to invest in an ownership position through the purchase of stocks.
Use this ten percent to purchase your equipment, products, or equity -- and get started. There is no telling what genius lies sleeping inside you waiting to be awakened by the spark of opportunity.
Here is an exciting thought! Why not work full time on your job and part time on your fortune? Why not, indeed? And what a feeling you'll have when you can honestly say, "I'm working to become wealthy. I'm not just working to pay my bills." When you have a wealth plan, you'll be so motivated that you'll have a hard time going to bed at night.
3) Savings - Money that you invest in your own business or savings (active capital)
The last ten percent should be allotted to savings. I consider this to be one of the most exciting parts of your wealth plan because it can offer you peace of mind by preparing you for the "winters" of life. And through the magic of compounding interest, greatly aided by the new tax-free retirement programs available to every working person in this country, you can accumulate a princely sum over the years.
Let me give you the definition of "rich" and "poor." Poor people spend their money and save what's left. Rich people save their money and spend what's left.
Twenty years ago, two people each earned a thousand dollars a month and they each earned the same increases over the years. One had the philosophy of spending money and saving what's left; the other had the philosophy of saving first and spending what's left. Today, if you knew both, you'd call one poor and the other wealthy.
So, I'm asking you to not only be a happy taxpayer, but to also remember that giving, investing and saving, like any form of discipline, has a subtle effect. At the end of the day, a week, a month, the results are hardly noticeable. But let five years lapse, and the differences become pronounced. At the end of ten years, the differences are dramatic.
And It all starts with the same amount of money -- just a different philosophy.
If people of any age focus on doing these three simple things over a long period of time, they will be assured success!
Jim Rohn, America's Foremost Business Philosopher, reprinted with permission from Jim Rohn International © 2016. As a world-renowned author and success expert, Jim Rohn touched millions of lives during his 46-year career as a motivational speaker and messenger of positive life change. For more information on Jim and his popular personal achievement resources or to subscribe to the weekly Jim Rohn Newsletter, visit www.JimRohn.com.