Pay Yourself First and Watch Your Wealth Grow

A Fool Proof Formula for Building Wealth

I’ve spoke all over the U.S. and Canada to audiences interested in wealth and asset protection. Some seminars feature real estate: tax certificates and foreclosures. Some focus on buying properties “subject–to” or fixer-uppers. Others focus on sales or trading.

New wealth builders often ask, “What is the secret to building wealth?” as if the secret lies in learning one particular strategy or another. The secret to building wealth is quite simple and its been known for generations. Its power isn’t in its complexity but in actually implementing this simple formula: Spend less than you make and invest the difference.

Let’s do that a different way. Here is the formula re-stated:

  1. Spend less than you make
  2. Invest the difference

Today, the average person spends 110% of his/her income. Consumer debt (interest on credit cards) is putting them in a hole. So, the first step is to revise your spending habits and start saving.

Many years ago, I heard the expression “Pay yourself first”. For the longest time, I thought that meant you should have your own business instead of working for someone else. That’s not necessarily so. In fact, it took over five years for me to catch on to what that really means.

So, for those of you that learn slowly (like I do) here’s what it means: Spend less than you make and put something in savings every week. Start small and build. I started as an adult with $50 a month. (At the time I, struggle to figure out how I could part with $50). Then build from their. Your initial target is 10% of your income. Then build from there.

Now for step 2) Invest the difference. You must learn to be a competent investor. The stock market, short term trading, real estate, the internet. Find investments that you are most comfortable with and learn to make money with them.
Jim Rohn talks about his 70/10/10/10 formula. He lives on 70% of his income. He invests 10% passively; puts 10% into active business interests and tithes the remaining 10%.

Your action step: Open a savings account today. Commit to adding a definite amount to it each week. In three months, as this amount becomes comfortable, increase it by 10%. Work toward saving 10% of your income. As it builds, learn everything you can about investing so that you’ll be ready as your nest egg grow.

Sincerely,
Drew Miles, The Tax Saving Attorney

 

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