Many people think that winning the lottery is a viable strategy for increasing wealth. There is a great quote by Ambrose Bierce that goes that the lottery is a tax on people that are bad at math. Any wealthy person will tell you that you have to start understanding money much better to make it work for you. Other advice is that nothing comes without working for it and systematically planning to get to the end result.
This article may often some wisdom in terms of money. Please note that this article is not financial advice and that you should consult a professional and make your own assessment of your financial options.
The first step
The first step to money power is the hardest.
The first step is to convince yourself on your most fundamental level that you do not want to lose money and that you want to start having money power.
This is not an intellectual decision – it must be something that you believe in your heart and in your gut. Find out why you have hang-ups with money and get it out of your system. Money is not mysterious – it exists around you as a form of exchange and while you may not be receiving too much of it today – you just need to open up to a possibility that you can have more than you have now – to start the journey.
We get taught a lot of things about money. You can hear your elders saying that “Money does not grow on trees” and “You have to work your whole life before you will have enough money”. Most of these have some element of truth but until you have a positive relationship with money it will leave you as soon as you have it.
At least 10% of your gross income should end up somewhere where you cannot touch it in the short term. Described by some as “paying yourself” – it really makes a difference to anyone if you start seeing the money pile up. After a year – you have a whole month of salary saved up and over 10 years you will a nice sum saved up.
If you can accelerate this to 30% of your monthly income – you can in 10 years have 3 years worth of income saved.
It is tempting to spend money you have saved on your goals. Read the rest of this article first and maybe it will give you some ideas.
Saving is its own reward and you will soon see that having a saving attitude changes your relationship with money. When you start seeing more ways to save – you also start seeing more ways to earn and soon you will be starting to grow your savings even more.
Research also shows that a savings mindset is as important as saving. By looking at how you can save in everything you start building up real money power.
You must budget. What is proposed here is a bit of budgeting with a difference.
Budgets are important – not for the amounts – but for what you are spending your money on. If you spend your money on things that are not essential – you tend to waste it.
Some of the key questions can be captured as an ABC budget.
- What am I spending on that is really essential? (A)
- What am I investing into – and what will it bring me? (B)
- What am I spending on that I should not? (C)
We all know that A is what we should focus on. But B is also important – you need to look at increasing the value of properties and increasing your ability to earn.
If you budget to spend more than you earn – that is a good sign that you are heading towards trouble. While budgeting might be hard initially – it pays for itself very soon.
Money power puts together a powerful way in which to evaluate if expenditure is necessary. You can just simply ask yourself if this expenses is an A, B and C and if you are honest with yourself – you will soon be spending on the right things.
Controlling expenses is very important. Some people try to save by cutting on essential spending. This is not saving – this is starving yourself and your family.
Controlling expenses is the art of spending on what you are supposed to and not on what you are not. Obviously if there are better alternatives at a lower cost you must pursue it – but remember the old saying that we are often penny wise and pound foolish.
Controlling expenses is there to make sure that you keep your money. By understanding where it is going, and where you are breaking your own budget – you will start to understand the real money wasters. You may have to go back to the budget many times before getting it right.
To have money power is to compare the budget to the plan and see the difference and understand it. Learning from the past and taking it into the future teaches more about money than any other format.
As your savings are increasing and you are starting to build a nice lump-sum, the next step is to invest. Investing requires you to understand what you are investing in. As per a previous article – you have many choices but in the end you need to do something with your money to ensure that it increases.
Always make sure you know how an investment works. What does it take to get in, what costs are associated with it and what will you get out. Make sure that you monitor an investment to get out what was set in place.
Pay others to bring you money
One of the simple principles of money is that others have it and to get it you may need to pay someone to go and fetch if for you.
Whether you invest in a financial instrument or in starting a business. At some level you are paying people to fetch money for you. So if you realise this then you can get better at it.
Cash is king
Whether you are running a mega corporation or a household – managing cash flow is very important. If you understand where the cash is going to come from and where it is going you get to a necessary level you can start planning. Don’t carry more cash than is necessary but always make sure that you have enough cash to do what you need to. While it is important to profit it is also import to have positive cash-flow.
As individuals we often only work with cash-flow and never evaluate if we are spending more that we earn. Both measurements are important.
Be the expert, rather than paying experts
What would other people employ you to do for them? What makes you an expert in your field and can you make money from this?
To really understand how this work you may have to watch some other experts making money. What do they do? You have seen a million experts telling you how it is. Now it is time for you to step up and be the expert.
Your expertise can be anything – even people with opinions get paid for them. Find someone that is willing to pay you for your expertise and you are onto a winning formula. The next step may be to figure out how to scale your advice so that more people can pay you for this.
Get paid for what you do
One mantra is that whatever is worth doing, is worth getting paid for. This view may be slightly narrow minded if you have no food – but it always important to balance the discussion to determine if you are making money.
You can also look at making money using the ABC method. Is not getting paid now an investment? If there is no or a small likelihood of you getting the money back – it is not an investment – it is a gamble.
Understand the hidden bottom line
A discount is usually given as a promise of more business. By discounting yourself upfront you are teaching your client bad habits. They tend to take advantage of you in future as well. It is fair to be negotiable in your dealings with people – but understand the real cost price and also the real limits in terms of what is non-negotiable.
In a negotiation you must first not go beyond your bottom line and it is better to walk away when you reach the hidden bottom line. Never do business that does not bring profit.
Increase your ability to earn – Educate yourself
Education is an investment that allows you to learn more.
The only difference between being poor and wealthy is the extent of your imagination. Real money power is available to those who visualise and let their thoughts translate into action.
Fuel your imagination today by teaching yourself the skills to manage people, business, money and power through your business studies.