Cover: Made from canva
Picking a brain from “The Richest Man In Babylon”, for every amount of money you make pay yourself first.
But what do you mean by this? You may wonder.
99% of the time we’re broke because we forget to pay ourselves time and time again. We make money but use everything to pay other people but ourselves. So you’ll realize that you’re making money but you’re still broke.
Where does all my money go? You wonder. And then you blame it on inflation, the spike in prices of items but you always forget your unending appetite for nice things.
Let’s not even jump to that height just yet. There are so many things you have skipped to start talking about inflation as being the reason why you keep getting broke every time even though you’re making money.
What is the composition of your money; is it a wage, salary, profit, earnings from whatever is it that you do or is it a gift? You don’t understand? Very well..
You should understand that to build wealth you need to be very disciplined with your money. Wealthy people don’t wait until they get the money before they start budgeting how to spend it. There is a system that breaks down the money before it even comes in.
The 50-30-20 Principle
I introduce you to the 50-30-20 principle. This is a percentage breakdown of any amount of money you get, even if it’s just a dollar.[Yes, the little amounts will challenge your discipline]. Do this with your money and see how drastically your finances will improve.
Whatever amount of money you get, divide it into 3 folds, thus 50%, 30%, and 20%.
The 50% should go into your basic needs. These are things you can’t live without such as food, utility bills, fuel, etc.
The 30% goes into your wants. Things you can actually live without but you still want them for yourself. (They shouldn’t be so unnecessary nor extravagant)
Last but not the least, the most important one, the 20%. This is what you pay yourself with. That’s your savings; this is what actually belongs to you.
First thing you receive the money you pay yourself, you take out your 20% (savings) and put it away. If you hesitate you’re going to end up using it to pay other people in addition to the 50% + the 30% you’re already using to pay them.
Paying people is buying items and services. Make sure whatever you want comes from the 50% plus the 30%.
Accumulate the 20% and build something that someone will also come and pay you for for yourself.
80% is already too much of your money to use to pay other people. Don’t pay more, rather work on reducing this percentage.
My mentor tells me, as a young person you need to be very ambitious.
To use this principle effectively you need to have a strong wealth mindset and not a Rich Mindset. “Wealth Mindset” is a topic I’ve covered in depth on my pages. I will share some more here too.
Picture not mine: downloaded from the internet