One of your major goals in life should be financial independence. You should determine to reach the point where you have enough money you never have to worry about money again. The good news is that it’s easier to achieve financial independence today than it has ever been before.
Financial freedom comes to the person who is able to save more than 10 percent of their income over their lifetime. This is one secret of the millionaire mindset
Why is this true? Because no matter how much money you earn, you won’t acquire wealth unless you learn to spend less than you make.
It is the money you savenot the money you make that determines your wealth.
Parkinson’ Law and your money
Cyril Northcote Parkinson’s was the first to articulate the relationship between work and allocated resources.
Parkinson law simply states, “work expands so as to fill the time available for its completion”
When you apply Parkinson’s Law to money, you observe that your expenses grow as your income grows.
If you have enjoyed a higher income, you already understand what I’m talking about.
When you make more money and things get better, you will find you want to change your cars, clothes and even your home address.
There is nothing wrong in trying to enjoy the finer things of life, so long as there is a limit.
The reality is that for most of us-high income earners, the desire to spend is always two-step ahead of the ability to earn.
You should not fall into this trap of impulsive spending. Your objective should be to defeat Parkinson’s Law.
If you fall into the trap of impulsive spending, you will have the trappings of wealth but never bits most valuable benefits: financial peace of mind to retire early.
Your primary aim in life should be the achievement of your own happiness. This means the absence of fears, doubts and negative emotions. When you worry about money, you also become unhappy.
Why you need to spend less than you earn.
Individuals, families and even societies are stable and prosperous to the degree to which they have a high savings rate. The wealthiest nations of old are now debtors because they have no reserves. The United States economy is now borrowing on steroids because the Feds are just printing paper money, the saving rate in the United states is about 3 percent.
However if you look East to China, India, Singapore you will begin to see the growing affluence in those societies because the nations have a higher savings rate ( more than 30 percent for China alone)
The bottom line is that your savings today are what guarantee the security and possibility of tomorrow. And the smartest thing you can do is to develop the habit of saving part of your salary, every paycheck.
Here are some tips to get you started on your road to financial security
- Pay yourself first. Paying yourself first means you set aside money for savings before you spend on anything else. the trick is to put aside your savings before even your mortgage, credit card payments or loans
- Begin today to put away 10 percent of your income. Set up a special account for this purpose and treat your contributions to this account with the same serious commitment you have for your mortgage payments. never miss a payment
- Avoid setting up rainy day funds. they don’t work. Because if you save for the rainy day, it doesn’t take long before it starts to rain.
- If you are in debt and 10 percent is too much, start by saving 1 percent of your income and living on the other 99 percent. When you become comfortable to living on 99 percent, increase your savings rate to 2 percent and over time work up your savings rate to 20 percent.
- Become a lifelong student of money. Read the best books you can find. Take courses on money management. Subscribe to the most helpful magazines. Be sure that you know what you are doing so you can make wise decisions when you invest your funds
Corporate America and Savings
Cash is king when it comes to business. The more cash reserve you have the lower your cost of borrowing money. The best place to teach this lesson is to look at corporate America. Companies with the high cash piles-have some of the highest price per share and are widely held by the institutional funds. If you own the stock in any of these companies, you can be confident they will eventually pay you dividend.
This is beside the point of what I want to say. The truth is most of these companies are holding on to their cash in order to secure their continued financial future.
What about you? Are you taking steps to save and secure your financial future?
The good news is you can start beginning today. Save yourself from the poorhouse today. Start saving
Think rich and grow rich
Akin Osho
