A Simple one page guide to building wealth
Wealth creation has often been the last thing on the mind of the common worker. After all, how can you think of building wealth when you’ve got so many bills to pay? If we take a look at who generally holds the wealth in in america, it would look something like this:
America=Overall wealth basket of 100 percent.
The top 1 percent , also known as the rich or the wealthy, own and control = 90 percent of America’s wealth.
Everyone else own and control= 10 percent of America’s wealth.
Now why is this? Is it because of the government? Is it because of capitalism? It would seem like an unbalanced number considering that the middle class is the engine of the American economy. Not to be overly simplistic, but one of the more common reasons would be the mindset held by those middle class.
During our younger days we are taught to work hard, go to school, and find a safe and secure job. But we’re not taught the ways of money and the logical ways of building wealth. We’re basically taught to climb the corporate ladder if we want to get ahead.
This however, is a mindset that worked very well in the industrial age. But that age has long gone away. And we are now in what is called the information age. We live in time where the opportunity to build wealth is greater than ever before in history.
Building Wealth Starts With Paying yourself before you pay anyone else
Now what does “paying yourself mean, anyways?
I’m gonna play with your brain just a little to give you an idea of how this works.
Most people take a day out of the week to do their bills. Or to do the family home budget. An important discipline all of us should have, really. We allocate money for the light bill, we put money aside for the cable bill. We’re making sure the cell phone bill is taken care of. We budget for our taxes.
Am I missing anything? O yea, we’ve gotta budget for the car note and mortgage payments.
And before you know it that big piece of pie or take home pay is stretched to the limits. But is there anything we’ve missed budgeting for?
Of coarse! How about paying yourself? That would be putting money aside for savings, investments, and financial education, which could include books or courses that teach you the ways of money. But here’s whats gonna really blow your mind. You’re supposed to put that money aside for you, first! Before any of the bills. Sounds a bit counter intuitive I know. But it is the way to building wealth believe it or not.
Make paying yourself a part of the family budget
Paying yourself first should be added into your monthly budget and you should live on whatever is left. Does this sound strange? Does it sound like something that probably only 1 percent of people in America would even consider? That’s why that same 1 percent control 90 percent of all the money in America! They pay themselves first. No one, not a bank, not a credit card company, and not even the government, should come before building a strong nest egg for you and your family, period.
I can recall having a conversation with a friend of mine about the idea of paying yourself first. He thought I was crazy for even suggesting to him this idea. His problem with this idea would go something like this:
If I paid 10 percent of my earnings to me first, then how will I have money to cover all of my bills? This is an honest question, really. And I certainly felt where he was coming from. My answer is this:
You have to convert your way of thinking while reorganize your priorities. Here is the order in which your income should be allocated. We call this the 20 – 30 – 50 rule for budgeting. We believe that following this rule will set you on the way to your financial goals and put you on the road to financial freedom. The rule converts the old way of thinking about money to a new and improved wealth building concept of money.
So, here’s the breakdown of the 20-30-50 rule of budgeting.
- 50 percent of your income should go towards the things you need to survive. This will include you mortgage, car note, home utilities like lights, gas, water, and home phone, e.t.c. It does not include your cell phone bill or cable as we believe these to go into the category of wants. However, if your cell phone is mainly used for business, then that may be included in this category.
- 30 percent should go towards your wants. This includes all forms of entertainment and things like dining out.
- Lastly, 20 percent should go towards all of your financial goals. This will include savings, investing, paying off any debt you may have.
Notice we didn’t give you any specifics on how to invest or where to put your money. This is because wealth creation starts at home. It starts with the first fruits of your income. It also comes from changing the way you think about money.
If you could follow this rule you will find yourself in the “Law of Accumulation”. You’ll watch as your savings and investments continue to grow and grow over time! And by investing in your financial education, you’ll learn all that you need to about investing.