I was raised by a mother who was responsible for five kids and had no clue about managing money. I know how difficult money can be for most of us; this is due to being stuck with information about money that is actually false.
The simplicity of economics is amazing and not as complicated as the schools and universities and books make it. To create financial freedom, you need lots of money. Here are a few tips that will help you simplify the idea of economics:
[gap]1. “Money Shortage Mindset”
Most people struggling with money think there is a shortage of it. The reality is that money is plentiful and even when there are shortages, we print more. This isn’t some esoteric, New Age concept, but reality: money is everywhere.
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2. Spend to get, don’t spend to consume.
Put everything you buy on a credit card or write a check so you have a complete record of all expenditures. Then, look at them and notice how many were made to consume rather than to grow your income.
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3. Rate your expenditures.
Take the last 60 days and rate all your monthly spending on a scale of 1 to 5, 5 being “most important.” Anything not rated a 3 or higher should be stopped immediately.
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4. Focus on a financial plan, not a budget.
People spend most of their time budgeting money (defense) rather than concentrating on a plan (offense) to create finances. I spend 90% of my time looking at ways to create income and how to invest and grow money and only 10% of my time elsewhere.
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5. All debt is not bad debt.
Debt that produces income or builds your value is good debt, contrary to what financial pundits like Dave Ramsey and Suze Orman suggest. Debt that is paid off by others or debt that actually generates income is good debt. It is probably safe to assume all other debt is bad.
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6. Create emergency accounts.
Add to your financial plan the creation of emergency accounts to take you through difficult periods. This should be funding for at least two to three years. Bad things happen to good people because good people don’t plan on bad things happening.
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7. Pay you first.
When it comes to money, pay yourself first – before you make the house payment, fund your savings and emergency accounts. Almost everyone I’ve ever met makes this mistake. If you can figure out how to pay someone you don’t know at Netflix, then simply add yourself to the list and pay you first. Send yourself an invoice each month until you get in the habit.
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8. Sacred Investment Accounts
At the age of 25, I set up three investments accounts, one of which was for real estate. I didn’t invest in anything until I was 34, and that account had over 100 months of money in it. When I finally had the knowledge necessary to invest, I also had the money with which to do it.
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9. Correct Income Formula
To calculate the real income, you need take your monthly Desired Savings + Emergency Funding + Investment Funds + Current Spending. Most people simply calculate their income based on their expenses. This can be a bit overwhelming at first, but will give you a real idea that you need to get busy connecting with income.
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10. Pay attention.
Once a week, on a set day, I sit down with my wife and two children to discuss our finances for 30 minutes. This gets everyone on the same page and demonstrates the importance of having control over our finances.
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I came from nothing and figured out how to get my money right. When put together, each of the steps above will force you into one reality: increase your income. Financial freedom is a game of offense, not defense.
Financial freedom is a game of offense, not defense.
