How do you get ahead financially?
With Americans on average living at a negative savings rate, meaning that we are spending more than we are making every year, it makes it extremely tough to become financially free and escape working for someone else.
The answer is two fold. Have a money management plan and acquire assets.
Below is a very simple money management plan that I like. You allocate a percentage of every dollar to a different category. Open a bank account for every category and then set up your accounts so that automatically the day after your paycheck comes in the money gets redistributed. We did this for no charge at US Bank and it worked like a charm.
50% to your necessities account (if you are like most Americans this is going to be like 95%+ when you start, more on that later)
10% to your financial freedom fund. (This gets you out of the rat race. Never ever spend this money ever on anything but an investment. You can spend the return from the investments but this is your golden goose, don't kill it by spending the money in this account.)
10% to your education account (You have to be educated on how to create wealth and invest your money)
10% to your giving account (100% of what we have is from the Creator, we should give at least 10% back)
10% to your long term savings account (This is for that new car, or PS3 or some other consumer purchase. If you can't pay cash don't buy it.)
10% to your fun account. Money and wealth are fun. Blow this money on whatever you want but make sure you have fun with it and no your spouse can't tell you what you spend your fun money on)
If your expenses don't allow you to get to these percentages start with a 95%, 1%, 1%, 1%, 1%, 1% allocation. You will show that you are being a good steward of your money and more will flow your way and eventually you will get to the right allocations. A money management system is key to getting ahead.
Second is acquiring assets. An asset is anything that puts money in your pocket. You could purchase some positive cash flow rental property; you could start a business part time or write a book and receive the royalties from that. An asset is NOT a property you purchase in Florida hoping that the value will go up, that is gambling. The same is true of stocks. If you purchase a stock and pray that it is going to go up in value and not because the company is undervalued and has a strong business position then you are gambling again.
When you acquire assets is when you start to set yourself free. You assets will help you to earn a passive residual income. That income will eventually replace your current income and you can choose what you want to do with your time.
So when are you going to set up your money management system and start acquiring assets?
That is the quick over view of how to get ahead financially. We will get into this in greater detail in future posts.
