Wealth Tips - Debt and Percentages
Good Morning
Back again with part two of my series on wealth creation.
Dealing with Debt
Debt comes when one wants to have things that are beyond their means and is willing to pay a higher price at the cash register. It is the classic kick the can down the road mentality.
The key to becoming wealthy is being satisfied with what you have. If you are satisfied with where you live and the things that you have around you, then you are able to start to have money as I spoke about in the last post.
"But I deserve a new tread mill and it will help me to be more healthy and alert at work..."
I tell that voice, "I can accomplish all those same goals and get fresh air too if I walk in the park."
"I deserve that new whachamacallit because I work hard!"
So you work hard, and you want to add slavery on top of the hours you already put in?
You can start to have money while in debt or you can tackle you debt and then start to have money. Either way, it will take the same amount of time to become rich and also eliminate the debt. When you look, a couple years down the road, and see that your debt is just a small percentage of the money your have, then it will be time to make that tiny transaction to kill your wad of debt. The most important thing is not to add to your debt while building your wealth. Just make those minimum payments until your pile of debt looks like a roll of pennies.
Percentages
Let's say you follow my advice and a year from now you have ten thousand saved. You have tightened your belt and have been living on a shoe-string budget for a year. Great! You deserve to splurge and get yourself something nice. Spend $1.00 outside of your budget - you deserve a treat.
before you get insulted read the next paragraph
Every three months or maybe six months, depending on crypto prices, I splurge and spend a tenth of a percent on something nice. I usually stay below a tenth of a percent of my savings, because I have money (you will too) and I rarely am able to spend even that tenth. This month I bought new phones for each if my kids and also new e-bikes for them. I got another bike for me and I still have eight grand to blow if I want to reach the 1/10 of one percent that I had planned to spend.
I will tuck that money off to the side in case one of the bikes gets stolen. I can just replace it and still be within my planned spending structure.
Becoming wealthy is not about the things you can buy. It is about the freedom you have when you have your bills covered for months to come. The ability to take a break if you need one. Recover if you get sick or have an accident.
So what are you going to do with your $1.00?
If you absolutely need to spend in order to feel good, you can decide to spend 5% or even 10% of you new savings stash. Take a treat if you have managed to save ten thousand. Do not spend it all! If you do, then will not have money anymore.
We have been talking about how to have money right?
If you decide to spend a hundred (1%) then you could do that again in three months or maybe six. If you spend a thousand (10%) then you should wait another year to have that experience again. Whatever you plan to spend, stick to it and increase the savings until your lump of debt is just ten percent of your have money pile. Then eliminate it all at once.
Once your debt is gone, your wealth will build much more quickly. Your worries will also decrease exponentially as a side effect.
Run the Math
So you have ten thousand saved. Let's assume a worst case scenario and you spend ten percent as a treat. You also go against my suggestion and spend another ten percent of your savings the next month, and again the next month, etc.. You also forget to save anything during those months...
You are spending 1000, 900, 810, 729, 656, 590, 531
Even after six months of horrible money management, you still have over five thousand dollars in the pile! You will actually never be able to spend it all if you stick to the 10% of savings rule, a worst case scenario rule. Your pile of cash will always contain 90% after you pull out 10% to spend. It would be very hard to spend it all.
This is a percentages game. Simple math.
Maintain your income level while reducing your expenditures and save money as if you were stock piling it. Spend one percent or less every few months on what you want. You will be wealthy.
If your luck holds out, that is.
1 How to Have Money
2 Debt and Percentages
3 Waste not, Want Not
4 A Practical Example
5 Cost Averaging for Investing
6 Overnight Successes
Wow that's quite an interesting theory. it does make a lot of sense, personally for me I try a 5% rule monthly, that's combine my rent, food and expenses..... I try to juggle this so that I still have 95% of all my savings left. End of month any excess I can put it towards the next hopefully then I have more because I still allow myself 5% per month !
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Want ......that is the thing that keep affecting people saving...the more we listen to want the more we keep.on spending.... limiting or checking our want is key to saving...I remember my friends asked me to buy a 4 wheeler....but in actual I never seen any usage...and never own any ...and the money I saved then I bought a piece of land and ultimately now with the price of that investments I can have now more than 5 cars.....but still I don't see any usage..🙂....
Great suggestion put into with good calculation....👍
Yes. Want and Need are misused to fool ourselves. Another is the word "Afford" which commits you to spending every bit of cash by just saying it!
@ezrider i totally agree with you
Great post @ezrider
I try not to settle for anything less.
And that is the way forward boss
And it is truly working for you...
I have been waiting for the second part and glad I came across it in my feed tonight. The 10% rule is very true and funny enough if you learn to save and live within your means you actually don't even need those treats. Over the last 4 years the one thing crypto teaches you is to save and stack as much as possible and think many could learn a lesson or two just by being involved. Looking forward to the next instalment.
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What an interesting money management right there...@ezrider
Great advice, man. I wish I read or came across such a post a long time ago, it would have been of help.
But that doesn't change a thing, it's better late than never and I would use this information to the best of my ability.
You have said well. 🙌🏼
Great advice, man. I wish I read or came across such a post a long time ago, it would have been of help.
But that doesn't change a thing, it's better late than never and I would use this information to the best of my ability. This is really a helpful post.
You have said well. 🙌🏼
Very good concept here, I think it’s certainly something more people should take into account. Having a spend limit is definitely a best idea. I only have X amount of money I can spend on something as a bit of a splurge. I think I’ve been able to stick to that pretty well overall, I would hope. Upgraded my PC a few weeks ago but that’s more work related I guess. Run my crypto stuff on that. My splurge would be a GoPro we bought and thinking of it in the percentage perspective I’m glad at the percentage of what it cost versus our savings. I guess I don’t think much on the percentage perspective but I think I should do that a little more!
One thing I’m glad to read is that you have little ones! I thought you might but that’s awesome! Precious little buggers they are hahaha.
The concept of not spending on things and doing an alternative instead like walking outside instead of a treadmill is definitely what more people need to practice I think. There’s lots of ways to do things without buying a new “thing”. I “need”(want, really) more weights for exercising in the house but do I want to buy them? Nope. I’ve figured ways to just use body weight to do what I need. Not as glamorous but gets the job done.
I dig this. This is neat :D
I am currently able to live "risk-free" without a job up to 1 year. But thats with investments and savings.
I also really don't need anything.
I may splurge on a new phone every 3 years which acceptable.
I think the last thing I bought was my wacom drawing pad which was under $100 xD