The Key to Real Wealth
For ever and a day, people have been trying any and every “Get Rich Quick” scheme they can find to make themselves wealthy.
Rarely does it work. When it does work, such as winning the Lotto, there are countless stories of Lotto winners ending up broke again within a few short years.
In my view, the main reason is that, whilst it plays a part, achieving wealth isn’t about what you earn. It’s about what you spend.
Let me say that again. Achieving wealth is more about what you spend, or don’t spend, than what you earn.
There are countless books which back this up but the most notable one is the all-time classic “The Richest Man in Babylon” by George S. Clason. The book imparts financial wisdom through a series of parables imparted by “The Richest Man in Babylon”.
The lessons from the book are:
– Start thy purse to fattening (i.e. pay yourself first)
– Control thy expenditure (i.e. live below your means)
– Make thy gold multiply (i.e. invest your money)
– Guard thy treasure from loss (i.e. get appropriate insurance)
– Make of thy dwelling a profitable investment (i.e. your home is your biggest expense)
– Ensure a future income (i.e. have a retirement plan)
– Increase thy ability to earn (i.e. invest in yourself)
– Know where you are and where you’re going (i.e. track your wealth)
So, of the 8 all-time secrets to building wealth, only one is related to earning more money. The rest relate to having a plan, controlling what you spend, investing some money and having the appropriate level of insurance.
Like anything, consistency is the key. Just like you can’t go on a diet for one day and hit the gym, do one massive session and expect to be fit, you must consistently keep track of what you’re spending and invest to achieve wealth. The plus side of this is that, if you’re consistent, it doesn’t have to be large sums of money.
The trick, of course, is to find some spare money.
We go through life struggling to make ends meet and there often isn’t enough to go around. How can we possibly find money to invest?
The secret sauce is to track your expenditure and, if you want to go one step further, have someone keep you accountable.
Tracking your expenditure provides you with the information you need to deal with your money on a conscious level.
Have you ever got to the end of the financial year, looked at your group certificate or business profit and think, “where did all of that money go”?
If so, you’re not alone.
The reason for this is that we tend to deal with our money on a subconscious level. We all know the big, regular costs such as our home loan or rent, car payment, school fees etc. These are often the fixed costs which, once signed up for, we can’t do much about. However, it’s the small, irregular amounts which can make or break your wealth building. It’s the coffees, the impulse buys while walking around the shops etc which make the difference.
The reality is that we often don’t know how much money we spend on these things and the hole it’s leaving in our budget.
If controlling expenditure is the key to wealth creation, why don’t more people do it?
In my experience, there are several reasons for this phenomenon:
– Lack of understanding of its importance;
– The “Head in the Sand” principal;
– Not wanting to be a slave to a budget; and
– Lack of time to properly track spending.
The first and second issues are overcome through education while the third issue is overcome by an understanding that planning and tracking expenditure is not necessarily about dictating what you can spend money on but rather providing you with an understanding of where you are spending your money so that you can make informed decisions regarding your finances. In relation to the lack of time issue, this has been overcome by advancements in technology. Gone are the days where you had to manually track each of your transactions with pen and paper or excel. Today, software exists which will link directly to all your bank, loan, credit card and PayPal accounts and import and categorise all of the transactions. There is a small amount of work setting up the system at the front end but, after that, it is simply a matter of reviewing the reports and making decisions on your financial future based on facts.
If you aren’t keeping track of where you are spending your hard-earned money, you are missing out on the real key to wealth.
Don’t let that be you. There really are no excuses…