I hate to tell you but the odds were against you from the start. 1 in 175 Million is pretty bad odds but have hope. You are actually lucky you didn’t win the lottery. Haven’t you watched those specials on TV where the people who win the lottery end up bankrupt or that they end up worse off afterwards? There are no short cuts to wealth building but if you will change the way you think about money your odds of building wealth are far greater than winning the lottery.
Spend Less Money Than What You Make
People who have money spend less money than what they make. The great part is that it doesn’t matter what you make, just as long as you are spending less. Someone who makes 20k a year but only spends 18k is better off than someone who makes 200k and spends 205k. If you ever want to start to accumulate wealth you need to know where your money is going. Once you know where it goes, you can then start deciding where to cut. You will want to start keeping receipts any time you spend money. You will also want to record your spending on some type of log. You can track it on a spreadsheet or if you prefer you can write it down on a sheet of paper each day. The key to having more money is by spending less of it.
Save
Your credit card company doesn’t love you. Neither does the electric company, the department store or the car sitting in your drive way. Nobody loves you more than you, so why aren’t your paying yourself before you pay anybody else? Your goal is to pay yourself at least 10% of what you make. Do not get hung up on the Net or Gross part. Just put 10% of what you make into a different account than what you pay your bills with. Set up a bill pay just like you do with everybody else but just make sure you pay you first
Reduce Your Debt
People that have money, have little or NO debt. You will build your wealth quicker when you are receiving interest on your money instead of paying interest to someone else. The first step to reducing you debt is by NOT charging any more. Take your credit cards and put them in Tupperware bowl, fill the bowl with water and then place in your freezer. If you get tempted to use your cards, you will have to wait a while until your cards thaw out. A great website to help you put a get out of debt plan is www.powerpay.org. Keep in mind that you didn’t GET in debt over night, neither will you GET out of debt overnight. The key is to quit charging and put together a plan.
Have Long Term Plans For Your Money
When you are younger you think that you will live forever and will worry about retirement at a later time. Most people are not putting enough money away for their retirement. If you are offered a retirement plan at work, you need to take advantage of that. There are many companies that offer matches on contributions so it is like turning down free money when you don’t contribute. Also the expenses are often less when you use a qualified plan that is offered by your company. You probably won’t live forever but you just want to make sure that you don’t outlive your money.
Do Not Allow Your Emotions To Influence Your Financial Decision
When you spend money, your brain releases endorphins to the pleasure receptors in your brain. Have you ever heard of a runner’s high? The same principle is in action when you make purchases. For example, when people buy a new car they really like that new car smell. The bad part is that after a few months that new car smell starts to fade but you are still left with 56 months of car payments. To increase your wealth you need to fight those short term feelings you get from buying things and keep your eye on the long term prize which is a comfortable retirement. If it’s the big screen TV because you think you need it now or the Designer Dress Shoes that you just saw the latest celebrity wearing, those short term emotions will derail your long term success.
Start Saving Early
One of the most important steps you have to take is to start saving now. The longer you put off the inevitable the more money it is going to cost you down the road. Assume you wanted to have a 15 foot Oak tree in your back yard. It is cheaper for you to buy a little Oak tree and let it grow over 10 years than for you to buy a 15 foot oak tree to put in your back yard now. The more time your money gets to work, the greater your probability that one day you will get to retire. If you are younger and think you can’t afford to put anything away it is better to save something, compared to saving nothing. If you compound nothing for 30 years you will still have nothing!
You have a choice. You can hope you will win the next Powerball or Mega Millions Lottery or you can start to adjust the things you are doing with your money. The choice is up to you. Anything in life worth having is worth working for. It might not be as easy as just picking six numbers and hoping for the best, but for better odds, follow the same principles as wealth builders and you might just find yourself with your own pile of cash.
By Steve Repak, CFP®
Steve Repak, CFP® is the author of Dollars & Uncommon Sense: Basic Training For Your Money. For more information, please visit www.DollarsAndUncommonSense.
