Category: Wealth

By Ryan H. Law

Business philosopher Jim Rohn taught that, “Poor people spend their money and save what’s left, while rich people save their money then spend what’s left.”

It’s familiar advice that we’ve all heard:

Pay yourself first.

Pay yourself first is one of the most repeated phrases about personal finances. One of my favorite financial books, “The Richest Man in Babylon”, which was originally published in 1926, repeats over and over the idea that, “a part of all I earn is mine to keep.”

But how do we actually do this? Today’s post will give you a few ideas to begin to implement this.

1. Contribute to your 401(k)If you have a 401(k) (or similar plan) available at work, this is one of the easiest ways to pay yourself first. Not only that, but in most cases this contribution will be pre-tax and will lower your tax bill.

   If you have a “match” from your employer, you aren’t just paying yourself first, you are, in many cases, at least doubling your savings. If you contribute 3% and your employer matches that, you are actually saving 6%.

2. Contribute to a Roth IRAIf you are eligible to contribute to a Roth IRA, it can be a great investment. Many mutual fund companies, such as Vanguard, T. Rowe Price and Fidelity, will allow you to set up an automatic transfer from your paycheck or bank account. You can often start with as little as $25 a month.
3. Have a set amount (ideally 10%) transferred out of your checking account and deposited in a savings accountIf your bank doesn’t allow this option, check with your employer. In most cases your employer will allow you to allow a certain amount, or a certain percentage, to go to different accounts. You can direct 10% to go to savings and the remaining amount to go to your primary checking account.

   If 10% is too much, start smaller. Start with 1% or ½ of 1%. See https://ryanhlaw.com/one-small-step/ for more information about starting small.

My last two posts have mainly focused on the internal world (thoughts) of the wealthy. Success, however, is a combination of our attitudes (internal) and our habits (external).

Before I go any further into today’s post, I want to clarify a few things:

• Wealth does not (automatically) equal success. If fact, you can find story after story of wealthy people who are estranged from their families and have no real friends. However, while the media loves to focus on those types of stories, there are many stories of wealthy people who are very successful in other areas of their lives as well.
• You may not want to be wealthy. Wealth brings additional challenges that some people may not want. The habits and attitudes defined here, however, can help in any area of your life.
• We are not wealthy (yet). We are doing better financially than we ever have, and I am confident that these habits will only improve what we have done.
• These posts only apply to those in a free-market economy, such as America. Being born in poverty in a third-world country brings an entirely different set of challenges. People born in poverty, however, can rise out of it using these types of habits.

If you would like to be better off in the future than you are now, however, this post, and my previous two posts, should help.

My post today is based on some great research that Tom Corley has done. He spent five years studying the habits of the wealthy and the poor. Tom’s family was wealthy until he was about 10, then they lost everything overnight and lived in poverty the next 11 years. Tom didn’t want to live this way – he wanted to know exactly what wealthy people did to become and stay wealthy. Here are some key findings from his five-years of research:

1. The wealthy live within their means. They save approximately 20% of their income and spend no more than 25% on housing, 15% on food and 10% on entertainment. This reminds me of one of my favorite quotes about millionaires:

   “Millionaires become millionaires by budgeting and controlling expenses, and they maintain their affluent status the same way.” -The Millionaire Next Door

 

2. 88% of the wealthy read at least 30 minutes per day about their career, education or for self-improvement. Only 2% of the poor do this. 63% listen to audiobooks as they commute, while only 5% of the poor do this.

 

3. 67% of the wealthy watch less than an hour of TV per day. 77% of the poor watch more than an hour of TV per day. Instead of watching TV the wealthy work on hobbies, or side businesses, or they volunteer and network.

 

4. And speaking of volunteering… 3/4 of wealthy people volunteer with an organization or cause they believe in at least 5 hours a month, while only 10% of the poor do this. Volunteering is a great way to network as well.

 

5. 62% of the wealthy are focused on at least one major goal every day. Only 6% of the poor do this.

 

6. The wealthy wake up early – 44% get up three hours before their work day begins. 3% of the poor do this.

 

7. 81% of the wealthy make and prioritize a to-do list the night before, while only 19% of poor people do. In addition, they focus on the tasks – they complete, on average, 70% of their list.

There are other habits as well, but these seven are a good starting place. If you were to pick one or two of these to begin focusing on, what would you choose?

My plans are to work on:

• Listening to audiobooks as I commute
• Waking up earlier
• Prioritizing my to-do list the night before

I would love to hear what area you are focusing on – please leave your comments below!

by Ryan Law

I recently picked up a copy of the book How Rich People Think^[i] by Steve Siebold. In the book Siebold shares 100 lessons he learned over a period of 26 years as he interviewed some of the wealthiest people in the world. The book reminds me of a few of my other favorite finance books, including The Millionaire Next Door and Think and Grow Rich. These books don’t focus on money per se, but how rich people think and act.

In today’s post I will share several of Siebold’s lessons.

#13 Middle class believes money is earned through labor…World class believes money is earned through thought

“The average person believes the harder they work the more money they’ll make. Their linear thinking equates labor and effort with financial success. This is why most people aren’t rich. They’re following an outdated model of success…The rich know that creative thinking is the highest paid skill in the world.”

This idea of creative thinking is a theme throughout the book. Siebold mentions numerous times that the best thing you can do is work on training your mind to find solutions to difficult problems. “The rich get richer,” Siebold says, “because they know the world is overflowing with wealth disguised as problems that need to be solved.” One way he recommends you train your mind is by investing at least one hour per day studying subjects that will help you move toward your vision.

#20 Middle class earns money doing things they don’t like to do…World class gets rich doing what they love

Surely you have heard the philosophy that you should “do what you love and the money will follow.” Do you believe that is true? On the last day of my class each semester I ask the question “How many of you truly believe you can do something you love and get paid well for it?” Most students raise their hands, but the reality is that most people don’t like what they do. Forbes reported on a study that showed that only 19% are satisfied with the work they do, 16% are somewhat satisfied and almost 2/3 of all people are dissatisfied, or unhappy in the work they do.^[ii]

There is a great video narrated by Alan Watts called “What is Money Was No Object?” that discusses this theme. Here is a link to the video: http://www.youtube.com/watch?v=C_sbcSRMsOc

Siebold says that “…passion is the real secret of getting rich…The rich go to work every day feeling passion for what they do, and their passion fuels their efforts.”

#50 Middle class dreams of having enough money to retire…World class dreams of having enough money to impact the world

What is your major money goal? Siebold says “…the masses major goal with money is to retire at 65 and hopefully have enough money to survive until they die. The world class, while often no more ambitious, set their sights on impacting the world with their wealth.”

Most people want to make a positive impact on the world. Think about some specific things you could do to make a difference for other people if you had the money to do it.

#58 Middle class have loosely defined goals with flexible deadlines…World class have highly defined goals with do or die deadlines

Jim Rohn, a famous speaker, author and consultant tells a story of meeting with his mentor, Earl Shoaff, for the first time. Shoaff said, “Let’s start with reviewing your goals.” Rohn said he didn’t have them with him so Shoaff said “Are they in your car? Why don’t you go get them so we can review them.” Rohn said they weren’t in his car and in fact he didn’t have any written goals. Shoaff then drilled into Rohn’s head the importance of having goals, and Rohn went on to equate this one principle with the majority of his success.

Siebold says only 3% of people have goals specific enough to generate the level of mental energy required for success, while “World-class thinkers focus on the single most important goal they desire and set a deadline for its achievement…Their do or die commitment to building a financial empire virtually guarantees their success.”

Here are a few of Siebold’s other lessons. World class…

• Believes building wealth is a team effort
• Focusses on money making activities
• Has an action mentality
• Takes calculated risks
• Believes money is about freedom
• Believes in self-reliance
• Is internally motivated to make money
• Believes starting a business is the fastest road to wealth

I encourage you to read books like this that challenge your thinking. You may not agree with everything Siebold or other authors like him say, but I believe it is a healthy thing to read things like this and seek for ways to improve your thinking.

[i] ISBN 978-0-9755003-4-7 Published by London House Press

[ii] http://www.forbes.com/sites/susanadams/2012/05/18/new-survey-majority-of-employees-dissatisfied/