Are you looking for ways to be better with your personal finances? Are you interested in developing good personal finance habits? Do you want to know the best ways to handle your home finances?
Groups like the Financial Industry Regulatory Authority (FINRA) and Investor Education Foundation conduct and releases reports like the National Financial Capability Study.
This study found that in the U.S., 19% of people surveyed stated that during the past year, their expenses exceeded their income (excluding big-ticket purchases such as a vehicle, a home, or any large expense).
Another finding was discovered that 46% of individuals in the US lack a fund to cover rainy day expenses to last up to three months, such as emergencies like sickness, job loss, or other kinds of economic downturn.
I’m going to show you the difference and how some people can get ahead further than others using a simple financial plan.
When comparing, people know they had similar jobs, and similar pay and this can work across many different scenarios for people. With this financial plan concept, you’d be surprised at how many people haven’t done this.
You can use a basic financial plan and really change your financial life. For example, let’s make up a salary. This is not my salary but a financial plan will be used for greater understanding. Let’s say a person is making $30,000 a year after taxes, so $30,000 divided by twelve months is $2,500.
In a month, you make $2,500. Most people are paid bi-weekly. Every two weeks they get a $1250 paycheck. Your monthly expenses are $1,600. Your monthly freed cash is your total monthly income, $2500 minus expenses, which are $1,600.
After that’s done, you have $900 in free cash. In twelve months, you will have had $10,800 in freed-up cash. This freed-up cash is also the same or similar to discretionary income or disposable income.
What you do with this excess cash determines your life and home finances decades from now. It is wise not to ignore your home finances.
It is often said by experts that thriving households are those who have good home finances in practice. Bad examples of home finances are like trying to keep up with the Joneses.
Next, is the difference between a poor person and a rich person.
How To Choose A Retirement Account
The 3 Biggest Things You Need To Know About Wealth
How To Start a Business Without Quitting Your Job
The Difference Between A Rich & A Poor Person
How a person is managing cash is the difference. Managing cash is what causes a person to be poor or rich over time.
A poor-minded person versus a rich-minded person managing cash with the same job and the same opportunity is determined by where they allocate their freed-up cash. It’s what you do with your money and managing cash needs to be a skill you master.
A poor-minded person, using the example figures from above has $900 leftover each month. The poor-minded person spends all of their cash on entertainment and other useless things that don’t add value to their life nor make them richer.
Everybody wants to have fun and be entertained, so if you go this way, just don’t spend all your money on entertainment and other things that do nothing for you.
These poor-minded people, overspend in areas of entertainment, they go on vacation all the time, and they’re shopping constantly even when they have closets full of clothes.
The point is to be mindful of where your money is going. The cash flow pattern of poor people is that they earn money and spend it all so nothing is left and they never get ahead in life.
If you are spending all your money, you must track it to see where it’s going then take a moment to create a written financial plan.
From earlier see what your total and/or average monthly income is then your total and/or expenses. You will see how much cash you have left over.
Whatever the amount left over you must allocate at least 10% or more into your retirement or savings account never to be touched.
If you don’t have anything left over then cut expenses and look for more way to earn money.
8 Personal Development Secrets
How To Get Anything You Want In Life
How To Make Passive Income: Quick Start Guide
The Best Personal Finance Habits
Statistics from Capital Counselor show the average U.S. consumer spends about $63,036 per year. It is important we limit spending and focus on modeling the behaviors of rich-minded people.
The rich-minded person, also using the same figures from above is left with $900. This person decides that every month he will put half, $450 into his retirement account and the other $450 will be is spending money.
These habits of saving serve him long-term so over a working career this person could retire comfortably while others who are poor-minded will not and be forced to keep working.
Another thing to note, every year this person increases their savings rate and look for ways to earn more.
When you save large amounts of cash you have options. When your broke your stuck in one place.
Related Articles:
What Business Channels Like CNN Purposely Don’t Tell You
How To Earn a Ground-Breaking Salary
Career Advancement Strategies Of Top Income Earners
Leverage Your Savings To Grow Richer
A bonus to this article is that wealthy people focus on increasing their income. They hustle and build stable income streams and one of many ways is real estate investing. The real estate hustle is real and alive.
This hustle wouldn’t be mentioned here and in many other places if it didn’t have the historical proven track record. Everyone has their own hustle, but I tend to focus on the ones that have produced the fairest time and financial return over longest period of time relative to its stability.
Imagine after over 5 to 10 years of saving you have a conversative $35,000. Imagine buying an investment property for $18,000 as your down payment on a rental that pays you $800 month or $9,600 annual.
Your invested cash comes back to you in 1.87 years plus the money starts to build up and that excess cash buys then 2nd investment property then the 3rd and so on.
This process will over time get you to a place where you don’t have to trade time, having a day job, for money and your assets or real estate provide cash flow to cover all expenses. The American dream right before your eyes.
You welcome, I love you to 😊. Real estate is just one of many examples but the wealthy master earning more money, saving then acquiring assets that are cash flow positive. This could be anything. There are businesses you can start for $100.
Sometimes you just open and start a website for $30. Some ambitious people even go spend $100 or more on clearance items like, Walmart or Big Lots or whatever, and then they would resell them online.
People are making decent salaries and some even making 100s of thousands and then good ones make millions.
I’m not into this type of business model but it does exist. The purpose is to have a portion of your money saved and another portion go to small business ventures with high-income potential growth.
Related Articles:
How To Start a Online Business From Nothing: Beginner’s Guide
Compound Interest Investing Benefits
This is what the rich-minded person is doing. Here is proven method for personal growth in your personal finances which involves compound interest through index mutual funds. If you Google compound interest calculator, you can put numbers in for scenarios.
The scenario here was $450 a month over 30 years. Compounded annually, and with the average of a 10% investment return, 30 years later, this guy would have $888,268. That’s not even including estimates for real estate income and small business ventures.
This really is a big difference versus someone who doesn’t save or saves but does not invest. Some people, they might be like, whoa, well, I don’t have $900 excess cash. What am I going to do?
I get it. I’ve been there. I use to make $12 an hour, but I still paid myself first, even if it was only $50 or $100.
Over time, I asked myself what must I do to make more? For most people, it’s just switching jobs or going into a different industry.
I learned a trade skill and my income tripled over a period of a few years. This increases the gap between my expenses and income.
The greater the gap the more freed-up cash you can use to invest to get richer. I’ve notice millionaires do this, so I patterned my life after this.
Earn through your salary then save and invest as much as you can and at the same time explore business ventures in the evenings and on weekends.
Many elite entrepreneurs started this way at first. This is not uncommon.
Related Articles:
Most Effective Ways to Invest With High Incomes
How To Start A Business With No Cash
Conclusion
There’s a lot of different tactics you can use. As explained earlier, this is how a basic math exercise that anybody can do with a piece of paper and a pen that takes five minutes can change your life. It changed mines.
Start saving money then you tell yourself, my cash needs to be growing each month, and just be serious about it. When you first start, like, I get it. People are going out to bars and parties as where my friends too.
You must have a balance that allow you to hit your goals. The most aggressive wealth builders usually focus on building startups, businesses or side ventures and only make time for family and selected friends who add to their ambitions.
This is a rare breed of people; you don’t have to do that if you don’t want to.
It is recommended that you have financial goals and a written plan so when things come up you can refer to your financial plans and decide if your actions are going to add or take from your personal finance pursuits.
Join/Subscribe to a Growing Group Of Wealth Creators
Social Media Accounts:
Twitter: https://twitter.com/smith_martize
Pinterest: https://www.pinterest.com/martizesmith/
Facebook Page: https://www.facebook.com/martizesmithfan
Facebook Group: https://www.facebook.com/groups
LinkedIn: https://www.linkedin.com/in/martizesmith/ Instagram: https://www.instagram.com/model_wealth_empowerment/