Spend less than you earn. It doesn’t matter what you do for a living. It doesn’t matter if you have a college degree or were born into a wealthy family. It doesn’t matter if you work full time or part time. It doesn’t even matter how much money you make! What matters is how much money you spend in relation to how much you make.The rich spend less than they earn.
It doesn’t matter where you work. As long as you are making money and you can live off less than you earn. If you save and eventually invest the rest, you will become rich. If you can save $3 each day, that’s $1,200 per year that you will have saved up. In one year you will have more in savings ($1,200) than the average 34 year old ($0).
But I only make a small fortune per hour (compared to the rest of the world), says almost everyone. It doesn’t matter. Someone that makes 300k per year and spends 300k per year may be no richer than someone making minimum wage that lives frugally and saves competitively.
The temptation that most people face is to continue to blow all the money that they make today, because tomorrow, when they are making more money, that is when they will start saving! This goes on for years, and maybe their income increases, but just as quickly another expense is added.
“I could stop spending money tomorrow and build my savings up quickly.” This person will always say tomorrow and tomorrow will never come. Not acting on what you know to be wise today is foolish. Foolishness only tends to get worse, like weeds in a garden.
“I need to buy such and such and then I will start making enough money to save.” After such and such is purchased, something else will arise that needs your money. The cycle will repeat and no money will ever be saved.
“I’m not making enough money to save.” You will never make enough money to save then. If saving money isn’t important enough for you when things are tight and money is slim, then it won’t be important to you when money is rolling in. Past behavior is the best predictor of future behavior.
Steps to becoming rich
1. Spend less than you earn. Don’t just stop there, get competitive about it. Spend as little as possible while still living at a level that won’t cause you or your spouse to become bitter.
2. Get an envelope and write the words “My Family’s Financial Future” on it. Then if you are tempted to take money out of it you will be reminded that you are only robbing from your family and your future self.
3. Pick an amount that you will put in every day no matter what. I would encourage you to start with $5 or $10 a day. $5 a day is about $1,800 in a year, and $10 a day is about $3,600.
If you have a full time job, find a hobby buying and selling things on Craigslist so you can earn extra money to save. Also, just because you are saving as much as you can doesn’t mean you are to live a life free of pleasures. Pick your pleasures and save for those at the same time. Don’t divert your savings to a vacation or some item you want to purchase, but rather figure out a way to save even more so you can accomplish both.
If you cannot, or will not live on less than you make today, you probably won’t tomorrow either. Five dollars a day doesn’t sound like it will amount to a lot, but it really is the difference between the rich and the poor.
I’d love to hear your thoughts, what’s worked for you or advice you would share for others. I hope you are all doing well.
*I wrote this post to try to encourage as many people as possible that it only takes a few dollars a day to change your financial future. Be willing to start small and make an goal to increase it as much as possible. I hope many of you find it encouraging.