There’s a reason the rich get richer and the poor get poorer, and it is not because the rich are greedy SOBs getting rich off the backs of the poor. That’s a victim mentality by those who don’t want to take responsibility for their lives. The rich get richer because they handle their money responsibly. By doing so, they create a positive cycle of wealth growth instead of a negative cycle of debt building.
Getting rich is very much like losing weight. If you want to lose weight, you eat less calories than you burn. If you want to accumulate wealth, you spend less than you earn. It's as simple as that. Both take sacrifice in the beginning. You may have to skip the restaurant meal due to calories when losing weight and due to finances when gaining wealth. Over time you will develop new habits and being healthy and wealthy will become second nature.
Accumulating wealth is like going on vacation. Let’s say you live in Omaha and want to go on a trip. In this instance, let’s say you have only two choices – California or Florida.
You make a decision – you choose Florida.
Then you get excited for your vacation and you start planning and visualizing. Where in Florida are you going? You’ll start researching the different towns, and once you’ve narrowed it down to one you’ll pick your hotel. How long is your vacation? Are you retired and able to roam around endlessly in an RV or will you need to fly in for the weekend because you don’t have any vacation time? How big is your budget? Is the sky the limit and you can go from key to key in your luxury yacht? Or are you on an extremely tight budget so you will be camping out at a state park?
After you plan, you start preparing. Let’s say you have two weeks off and decide to drive to Miami Beach. It takes about 24 hours to drive there, so you break it up into three 8-hour days of driving as you have the time. However, your car is a mess filled with sporting and work equipment. You also want to get the brakes checked before you leave. So you take a weekend afternoon and empty out the car, vacuum the inside, and then take it into the shop the following Monday to check the brakes. After analyzing the situation (it needed some cleaning up and you needed to go to a professional – the mechanic), you get things in order and you are ready to go. You pack your suitcase and fill the car with only what you need.
After programming your hotel's address on your phone's map application, you head out toward your destination – Florida! You get on the interstate heading south. That’s the direction you are heading after all. After about 150 miles or so, you turn east, not west. California is to the west. You chose to go to Florida, not California. In a while you head south again, then east, but you never drive west, not even for a ten-mile detour. Why would you go west for even ten miles? You are going to Florida, not California. Driving toward California when you are going to Florida is a waste of time and gas. You would only have to turn around and go back east again. That would cut into your vacation time.
Your focus is on going east. To go west toward California doesn’t even cross your mind. Every few hours, you stop at a tourist attraction to break up the drive. However, you don’t pull over and waste your time playing video games for hours. No, you have a destination – Florida – and you keep heading in your direction. Perhaps you are traveling with others who decide halfway they would rather go to California. They say Florida can wait; they impatiently want to go to California. No, your heart is set on Florida, so you drive them to the closest airport and let them fly off to California. You are going to Florida, and no one is going to stop you.
Well, no one until the road construction. The ensuing traffic jam adds a couple hours to your drive. Do you throw your arms up in the air and head back to Omaha? No, you wait it out and keep driving east, maybe slower for a bit, but you still keep plodding along. Then you feel it – you’ve got a flat. Do you turn around and cancel your vacation plans? No. You pull over, fix the problem, and continue. Finally, after four days (remember you had to make a detour to the airport, wait for road construction, and fix your tire), you make it to Florida! At no time did you take your eye off your destination – Miami Beach.
This may seem like a silly analogy but replace the words “Florida” with “wealth” and “California” with “debt.” It really is no different. Most people have no problem when making it to their vacation destinations, they don’t end up in the wrong towns or in the wrong hotels. However, they’ll make up endless excuses why they can’t make it to their financial destinations. They blame society, their lack of whatever they perceive they lack, and "the man."
When you started out on your hypothetical road trip you were at home in your routine life. It was neither good nor bad. It was just where you were in that moment - before you got in your car and started heading to your destination. To get on the road to wealth, choose your destination, plan, make the proper preparations, and then stay focused while you head in that direction. It doesn't matter where you are at the moment as long as you know where you are going.
Where do you want to go?
If you are reading this, your preferred destination most likely is wealth accumulation. To do so, you must focus on creating wealth while not thinking about debt, just as if you’re heading to Florida and not thinking about California. Every step you take should be heading in the direction of your goal. Become single minded. Wait out the obstacles, fix the problems, and leave the people behind who weigh you down.
How are you going to get there?
When people get in debt, they get stuck in a cycle of paying interest on the debt. Whereas when people are wealthy, they are paid interest and their wealth accumulates. In other words, the rich get richer and the poor get poorer. If you are in the cycle of debt, do not despair. There is a way out, and it is possible. It will take sacrificing in the beginning, but it will quickly become easier. This post is about reversing the negative cycle into a positive direction. There are two important steps in creating wealth - acquire savings and eliminate debt. Once this is done, you are on a positive financial cycle. Don't recite a victim's story that you can't do this because every wealthy person has created a positive wealth cycle. There is no reason that you can't do it either.
Step one – Open a savings account
It usually requires $100 to open a savings account. Don’t have $100? Get a jar. Pay cash for everything. Put the change you get back in the jar. When the change reaches $100, open the savings account. Stores do this all the time with charities. They ask customers to round up their change for charities, which results in an average of $30 to $100 in donations daily, depending on the store's size. Remember, not everyone gives and the average donation is basically a couple cents the customer would have received as change. The important thing to realize is that all those pennies do add up. Try it for a month, you will see how quickly your change accumulates. Don’t stop once you've reached your goal of $100. Continue putting your change into your jar and deposit the jar's content once a month into savings.
Step two – Pay yourself first
Every time you get paid, transfer 10% of your paycheck immediately into savings. Do not touch it while you are creating a wealth cycle. Once you have a nest egg, unexpected expenses won't create turmoil in your life. You'll be able to pay your unforeseen bills without charging them on your credit cards. This money isn't for going on a shopping spree. It's to tap into during emergencies and therefore stopping the need to borrow to get by in life.
Step three – Rip up your credit cards
This may seem impossible at first, but it’s like the first day of a diet, you have to do it. If you are charging items you cannot afford, everything you are buying is being bought with interest. Everything. If you don’t pay the entire amount off then the next month you will pay interest on the interest, and the following month interest on that interest. And so on. It’s a vicious cycle. The only way to get out of this cycle is to stop charging and pay off the balance.
Step four - Get a debit card to replace the credit card
Step five - Buy only what you need until you are in a healthy debt situation (Debt over 36% of annual gross income is considered unhealthy)
The world isn’t going to collapse because you didn’t get the latest gizmo or see the most recent movie. Become a minimalist. It’s a lot less stressful.
Step six - Pay cash for everything
Never pay ATM charges to get your own money. You can withdraw money at grocery stores and banks for free. Before going into a store, decide a limit on how much you will spend, then take only that amount of cash into the store with you. You will spend around 12% to 18% less by limiting yourself before you go in the store because you won’t have that extra dollar to buy any unnecessary impulse items.
Step seven – Map out a payment plan on your credit card debt
Decide how much each month you are going to pay down the balance and do it – keep heading to Florida. Don’t take a detour west to California because your girlfriends want you to spend $150 to go to a concert. Do something else with them such as inviting them over to share a bottle of wine with you at home. You still get to enjoy the friendship without heading to California. If they keep insisting, drive them to the airport and ship them off to California. You are going to Florida, remember?
Call your credit card company and see if they’ll lower your interest rate. If not, see if you can get a different credit card with a lower interest and transfer your balance. Apply for an unsecured or home equity loan and transfer the debt. Every percentage point counts. The point is stop using your credit card and pay it off as quickly as possible. It’s too easy to buy whatever you need with plastic and then get stuck paying for it forever.
Step seven – Evaluate your lifestyle
Did you overbuy on your car or house? Is it worth the stress of owning these things? If you’re not upside down on them, consider downsizing and living within your means. You’ll be a lot happier once you do.
Step eight – Job jump
The unemployment rate today is so low that people who the government and economists say are unemployable are being hired. Employers are having a very difficult time attracting and retaining employees. It’s a workers’ job market. Where I work it amazes me how low of salary people will accept for their skills when they could make much more. They accept their lot in life without striving for more.
Start looking elsewhere for a job when you already have one. The ball is in your court. If hired, you can ask for whatever you want. If the new company says no, you still have your job. If they say yes, you can go back to your employer and use it to negotiate a raise for more than your new company is offering. If your current company denies your request, move on to the next company.
Here’s another tip: If a company can afford to advertise on LinkedIn or on Monster to recruit employees, they are in a position to pay more than a company posting a sign on a door.
If you are in a low paying job (or even if you’re not), get an account on LinkedIn. Find your dream job and see what employers are requiring for that position. Cut and paste the requirements into a document on your computer and begin acquiring the skills. As you attain them, add them to your list of skills on LinkedIn. The only person keeping you in a low paid job is you. The way to get out is to value yourself enough to acquire the skills employers want.
In summary, the only way to accumulate wealth is to get out of the negative interest paying cycle and save up enough money so that you are the one getting paid interest. Start a savings account and pay yourself first, get rid of any credit card debt as soon as possible, live within your means, and always work toward better employment opportunities. If you consistently spend less than you earn, you will acquire wealth.
Getting rich is very much like losing weight. If you want to lose weight, you eat less calories than you burn. If you want to accumulate wealth, you spend less than you earn. It's as simple as that. Both take sacrifice in the beginning. You may have to skip the restaurant meal due to calories when losing weight and due to finances when gaining wealth. Over time you will develop new habits and being healthy and wealthy will become second nature.
Accumulating wealth is like going on vacation. Let’s say you live in Omaha and want to go on a trip. In this instance, let’s say you have only two choices – California or Florida.
You make a decision – you choose Florida.
Then you get excited for your vacation and you start planning and visualizing. Where in Florida are you going? You’ll start researching the different towns, and once you’ve narrowed it down to one you’ll pick your hotel. How long is your vacation? Are you retired and able to roam around endlessly in an RV or will you need to fly in for the weekend because you don’t have any vacation time? How big is your budget? Is the sky the limit and you can go from key to key in your luxury yacht? Or are you on an extremely tight budget so you will be camping out at a state park?
After you plan, you start preparing. Let’s say you have two weeks off and decide to drive to Miami Beach. It takes about 24 hours to drive there, so you break it up into three 8-hour days of driving as you have the time. However, your car is a mess filled with sporting and work equipment. You also want to get the brakes checked before you leave. So you take a weekend afternoon and empty out the car, vacuum the inside, and then take it into the shop the following Monday to check the brakes. After analyzing the situation (it needed some cleaning up and you needed to go to a professional – the mechanic), you get things in order and you are ready to go. You pack your suitcase and fill the car with only what you need.
After programming your hotel's address on your phone's map application, you head out toward your destination – Florida! You get on the interstate heading south. That’s the direction you are heading after all. After about 150 miles or so, you turn east, not west. California is to the west. You chose to go to Florida, not California. In a while you head south again, then east, but you never drive west, not even for a ten-mile detour. Why would you go west for even ten miles? You are going to Florida, not California. Driving toward California when you are going to Florida is a waste of time and gas. You would only have to turn around and go back east again. That would cut into your vacation time.
Your focus is on going east. To go west toward California doesn’t even cross your mind. Every few hours, you stop at a tourist attraction to break up the drive. However, you don’t pull over and waste your time playing video games for hours. No, you have a destination – Florida – and you keep heading in your direction. Perhaps you are traveling with others who decide halfway they would rather go to California. They say Florida can wait; they impatiently want to go to California. No, your heart is set on Florida, so you drive them to the closest airport and let them fly off to California. You are going to Florida, and no one is going to stop you.
Well, no one until the road construction. The ensuing traffic jam adds a couple hours to your drive. Do you throw your arms up in the air and head back to Omaha? No, you wait it out and keep driving east, maybe slower for a bit, but you still keep plodding along. Then you feel it – you’ve got a flat. Do you turn around and cancel your vacation plans? No. You pull over, fix the problem, and continue. Finally, after four days (remember you had to make a detour to the airport, wait for road construction, and fix your tire), you make it to Florida! At no time did you take your eye off your destination – Miami Beach.
This may seem like a silly analogy but replace the words “Florida” with “wealth” and “California” with “debt.” It really is no different. Most people have no problem when making it to their vacation destinations, they don’t end up in the wrong towns or in the wrong hotels. However, they’ll make up endless excuses why they can’t make it to their financial destinations. They blame society, their lack of whatever they perceive they lack, and "the man."
When you started out on your hypothetical road trip you were at home in your routine life. It was neither good nor bad. It was just where you were in that moment - before you got in your car and started heading to your destination. To get on the road to wealth, choose your destination, plan, make the proper preparations, and then stay focused while you head in that direction. It doesn't matter where you are at the moment as long as you know where you are going.
Where do you want to go?
If you are reading this, your preferred destination most likely is wealth accumulation. To do so, you must focus on creating wealth while not thinking about debt, just as if you’re heading to Florida and not thinking about California. Every step you take should be heading in the direction of your goal. Become single minded. Wait out the obstacles, fix the problems, and leave the people behind who weigh you down.
How are you going to get there?
When people get in debt, they get stuck in a cycle of paying interest on the debt. Whereas when people are wealthy, they are paid interest and their wealth accumulates. In other words, the rich get richer and the poor get poorer. If you are in the cycle of debt, do not despair. There is a way out, and it is possible. It will take sacrificing in the beginning, but it will quickly become easier. This post is about reversing the negative cycle into a positive direction. There are two important steps in creating wealth - acquire savings and eliminate debt. Once this is done, you are on a positive financial cycle. Don't recite a victim's story that you can't do this because every wealthy person has created a positive wealth cycle. There is no reason that you can't do it either.
Step one – Open a savings account
It usually requires $100 to open a savings account. Don’t have $100? Get a jar. Pay cash for everything. Put the change you get back in the jar. When the change reaches $100, open the savings account. Stores do this all the time with charities. They ask customers to round up their change for charities, which results in an average of $30 to $100 in donations daily, depending on the store's size. Remember, not everyone gives and the average donation is basically a couple cents the customer would have received as change. The important thing to realize is that all those pennies do add up. Try it for a month, you will see how quickly your change accumulates. Don’t stop once you've reached your goal of $100. Continue putting your change into your jar and deposit the jar's content once a month into savings.
Step two – Pay yourself first
Every time you get paid, transfer 10% of your paycheck immediately into savings. Do not touch it while you are creating a wealth cycle. Once you have a nest egg, unexpected expenses won't create turmoil in your life. You'll be able to pay your unforeseen bills without charging them on your credit cards. This money isn't for going on a shopping spree. It's to tap into during emergencies and therefore stopping the need to borrow to get by in life.
Step three – Rip up your credit cards
This may seem impossible at first, but it’s like the first day of a diet, you have to do it. If you are charging items you cannot afford, everything you are buying is being bought with interest. Everything. If you don’t pay the entire amount off then the next month you will pay interest on the interest, and the following month interest on that interest. And so on. It’s a vicious cycle. The only way to get out of this cycle is to stop charging and pay off the balance.
Step four - Get a debit card to replace the credit card
Step five - Buy only what you need until you are in a healthy debt situation (Debt over 36% of annual gross income is considered unhealthy)
The world isn’t going to collapse because you didn’t get the latest gizmo or see the most recent movie. Become a minimalist. It’s a lot less stressful.
Step six - Pay cash for everything
Never pay ATM charges to get your own money. You can withdraw money at grocery stores and banks for free. Before going into a store, decide a limit on how much you will spend, then take only that amount of cash into the store with you. You will spend around 12% to 18% less by limiting yourself before you go in the store because you won’t have that extra dollar to buy any unnecessary impulse items.
Step seven – Map out a payment plan on your credit card debt
Decide how much each month you are going to pay down the balance and do it – keep heading to Florida. Don’t take a detour west to California because your girlfriends want you to spend $150 to go to a concert. Do something else with them such as inviting them over to share a bottle of wine with you at home. You still get to enjoy the friendship without heading to California. If they keep insisting, drive them to the airport and ship them off to California. You are going to Florida, remember?
Call your credit card company and see if they’ll lower your interest rate. If not, see if you can get a different credit card with a lower interest and transfer your balance. Apply for an unsecured or home equity loan and transfer the debt. Every percentage point counts. The point is stop using your credit card and pay it off as quickly as possible. It’s too easy to buy whatever you need with plastic and then get stuck paying for it forever.
Step seven – Evaluate your lifestyle
Did you overbuy on your car or house? Is it worth the stress of owning these things? If you’re not upside down on them, consider downsizing and living within your means. You’ll be a lot happier once you do.
Step eight – Job jump
The unemployment rate today is so low that people who the government and economists say are unemployable are being hired. Employers are having a very difficult time attracting and retaining employees. It’s a workers’ job market. Where I work it amazes me how low of salary people will accept for their skills when they could make much more. They accept their lot in life without striving for more.
Start looking elsewhere for a job when you already have one. The ball is in your court. If hired, you can ask for whatever you want. If the new company says no, you still have your job. If they say yes, you can go back to your employer and use it to negotiate a raise for more than your new company is offering. If your current company denies your request, move on to the next company.
Here’s another tip: If a company can afford to advertise on LinkedIn or on Monster to recruit employees, they are in a position to pay more than a company posting a sign on a door.
If you are in a low paying job (or even if you’re not), get an account on LinkedIn. Find your dream job and see what employers are requiring for that position. Cut and paste the requirements into a document on your computer and begin acquiring the skills. As you attain them, add them to your list of skills on LinkedIn. The only person keeping you in a low paid job is you. The way to get out is to value yourself enough to acquire the skills employers want.
In summary, the only way to accumulate wealth is to get out of the negative interest paying cycle and save up enough money so that you are the one getting paid interest. Start a savings account and pay yourself first, get rid of any credit card debt as soon as possible, live within your means, and always work toward better employment opportunities. If you consistently spend less than you earn, you will acquire wealth.
