When people describe a level 10 lifestyle it often includes becoming wealthy. Do you want to improve your personal finances? People’s goals on becoming wealthy varies depending on what they want out of life, but in general I hear a lot of “I don’t want any stress about paying bills etc”. They don’t want that fear at the end of the month about not being able to pay bills, or not worrying about how they are going to pay for their kids school fees, or what happens if the boiler packs in, can we afford to fix it?
The first question I ask people when it comes to their personal finances is this….
What is your wealth plan?
To which they normally respond with something like… “I don’t have a wealth plan, I am not wealthy. I will plan what to do with my wealth when I get it.”
Which is absolutely CRAZY!! You don’t start a health plan when you are already healthy. You were unhealthy, and implemented a plan to get healthy. It should be the same with your personal finances.
You will not improve your personal finances by accident. People say yes I will just improve my business and then take more out of it, and when that happens I will start a plan.
Well I can bet that if you do improve your business finances, I am guessing you won’t because you probably don’t have a plan there either, you will still have the same financial issues you do now.
Think about how many lottery winners, are broke and back to their old way of life within a couple of years. its crazy. They don’t know how to deal with money. They don’t have a wealth plan. They have a “spend as much as I can (and often more) plan”. You don’t want to be that person.
So here are a couple of suggestions that I have picked up over the alst few years. One of my favourite comes from Jim Rohn, keeping it super simple.
When you get your paycheck, immediately take out 30% – in fact you can now make this happen automatically with your bank accounts.
10% goes straight into savings
10% goes straight into long term investments
10% goes to giving back to a cause that means a lot to you.
Dave Ramsey, author of Total Money Makeover, encourages you to have 3-6 months worth of expenses in savings. So you can cover yourself for several months in the event of a loss of job or other unforeseen circumstance.
The problem is most peoples plan involves living above their means. What I mean by this, is they spend more every month than they have coming in. they are just getting more and more into debt.
And I can already here you saying, Chris, there is no way I can take out 30% of my salary.
Well, what would happen if tomorrow the government put a new tax out that was 30% of your salary? You would bitch and moan like crazy, but you would find a way to do it.
So start now! You should live off 70% of your salary. 10% going into investments that will start making money work for you. That earn you money while you sleep. Overtime this will build up and the compound effect will see that you are reward for consistency over time.
If you can afford to invest more, then do it. You don’t have to stick to these figures, but I recommend you put a plan in place right now and stick to it.