10 points on becoming rich

From: Land Holdings


I was listening to the Oprah talk show the other day and the topic was ordinary people, extraordinary wealth. Of course it was pushing a new book that someone had just written, however they had these people on the show who were earning low to medium amounts of money and had managed to save a HUGE amount. (Admittedly they did this through managed funds and the like but the lessons are still applicable.)

The main theme was 'Pay yourself first' One man said he paid himself 20% of whatever he was earning. (I'm still trying to work out if this was before or after tax.)

Here are the other 10 points:

1. Don't spend your change. Pay for everything in notes and put the change straight into your savings jar. One man saved $53,000 this way over 19 years for his son's college fund.

2. When you save money from discounts, SAVE it - ie put the equivalent money into your savings.

3. Cancel your cable.

4. Take your lunch to work. You can save enormous amounts of money doing this - do the maths!

5. Limit magazine and newspaper purchases. Read someone else's discarded newspaper - its cheaper!

6. Increase your insurance deductibles. Which means increase the amount that you will pay your first in the event of an accident eg You pay the first $500 not $250 if something happens. You will save more than the difference.

7. Lower your thermostat (Perhaps this is an American thing but we could just sweat it out in summer instead of over using the air conditioning!)

8. Set up auto-paying for your bills. (I don't think this one does much since we can B-Pay bills anyway without wasting a cheque and postage on bills)

9. Stop using the ATM. Draw out the month's money ONCE then budget down from there. One woman on the show actually split her spending money into things like "Groceries" into different envelopes to make it easier.

10. Buy less soda. This means stop spending money on soft drinks, gum, candy, coffee... all the the little things can add up to a lot. You can save thousands a year this way.

I thought this show was really worthwhile. One guy who was a dry cleaner and on a salary of 70 - 100 thousand (US$ of course) managed to save 1 - 3 million by being frugal but of course it is in managed funds.

Imagine what they could have done if they had put some of it into investment property!

Hope this helps all you budding multi-millionaires!

Cheers!

LH.
 
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Reply: 1
From: Robert Forward


Hi Land Holdings

My thoughts about most of the points on the list is that it's just "Penny Pinching". Yes you can save money I won't deny this but it will take ages to get anything worth while, mean while inflation is eating it away.

My way of budgeting is to save 10% straight cash (after tax) in a reasonable interest rate account. I then use 20% for investing (this means all my investing purchases and costs). And I live on 70%.

So to me it's a matter of paying the 10% & 20% first and then live on the remainder. I then adjust my daily expenses to match this 70%. But it isn't the adjusting of the daily expenses that makes you wealthy it's the 10% & 20% parts that make you wealthy.

But that is just my thoughts and the way I live.

Cheers
Robert

Cheers
Robert

The Sydney "Freestylers" Group Leader.

PS: "Be Not Afraid Of Growing Slowly, Be Afraid Of Only Standing Still."
 
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Reply: 1.1
From: J Parker


good post there LH! Mind you, I don't fancy saving $53K in small change myself. Think of the poor moneybox! A piggy just wouldn't cope I'm afraid..........
cheers, Jacque :)
 
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Reply: 2
From: The Wife


LH,

Great post!

I think you will find all wealthy people are frugal in a lot of areas, I truely believe you need a tight grip on a budget before you can start investing, thanks for bringing the 10 points out, the lady you mentioned who sectioned her money of into envelopes, must be using a similar system to my jar system.

This is why I wrote the budget book before I wrote anything else (sold out waiting on a reprint, although I hear Ruby has more than her share of them, i think i need to buy some back)knowing where all your cents are, is the very first step to wealth, and always pay yourself first, even if you have to start with 2%, pay yourself first.

Cheers, TW
~Life is a daring adventure, or nothing at all~
 
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Reply: 2.1
From: Rick Otton


people spend their money on stuff cause they want to get the short term i feel good feeling. i call this the herion hit that makes them feel good and it does.
being able to do what you want when you want does the same thing....

.........boy,.. now is this getting deep..
 
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Reply: 2.1.1
From: Mark Laszczuk


Hey guys,
Don't underestimate the putting small change in the jar. It's fantastic! My partner and I do it (she even puts all her tip money in there). You'd be surprised how much you save. Think about it: would you rather have that money in your pocket (or investment account - that's where we put ours) or in someone elses?

Mark
'no hat, some cattle'
 
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Reply: 2.1.1.1.1
From: Mark Laszczuk


Thanks for that Rick. I'm off to the tailors tomorrow!

Mark
'no hat, some cattle'
 
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Reply: 2.1.1.1.1.1
From: Adam Weisser


I'd like to point out that, no matter how important it is to have money and to grow rich, it is also important to have a happy life.

To me, the most important thing is to maintain the balance between saving/investing all your pennies for tomorrow and living your life today.

I went through a period of being very depressed about our inability to live on 70% of my income. I became totally focused on spending less money. Not only did it not improve our financial position greatly, but it made me a very unhappy person.

While I still have not spent money on my computer which is something I would dearly love to do, I have been allowing myself to go to the pub with friends without stressing over every beer or game of pinball. These things are important too.

Balance. That's what it's all about.

Well. That's what I think anyway.

Adam
 
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Reply: 2.1.1.1.1.1.1
From: Robert Forward


Hi Adam

I agree with what your saying. We all have a quality of life that we like to live in. Yes some restraint is needed to achieve the goals. But the easiest way of getting your living costs down to 70% is by earning more income. Now I'm talking about income from investments, I for one am now living on 60% for living expenses as my income from investments are now bringing in that much extra. Though I do return my investment income back into itself to invest more.

Cheers
Robert

The Sydney "Freestylers" Group Leader.

PS: "Be Not Afraid Of Growing Slowly, Be Afraid Of Only Standing Still."
 
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Reply: 2.1.1.1.1.1.1.1
From: GoAnna !


I think we become the habits we practice each day. And I agree with Adam that is is about balance.

I don't want to live alone in a cold shed eating no brand cat food (even my cat rejected this lifestyle) with zillions of dollars in my bank account. But neither do I want to be constantly stressed about my ability to pay the bills because I have gone overboard with consumerism.

I too watched the program and for me it was a reminder that 2% of change each day (that ain't gonna hurt anyone)will accumulate into enormous change over time. If you try to change a few things 100% it will be painful but to change many 2% will hardly be noticeable.

The magic begins when your saving become revenue generating investments and you can enjoy things that were previously never an option.

GoAnna !
"Obstacles are those frightful things you see when you take your eyes off your goal."
-Henry Ford
 
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10 points to becoming rich

Reply: 3
From: Brett Burt


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"Watch the small expenses and the big ones will look after themselves"
That is my 2 cents worth ! Bugger it, it's Xmas, empty the biscuit tin =and party ! BB

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"Watch the small expenses and the big ones will look =after
themselves"
That is my 2 cents worth ! Bugger it, it's =Xmas, empty
thebiscuit tin and party ! BB

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Reply: 2.1.1.1.1.1.1.1.1
From: Anonymous


To all the tight asses, GET A LIFE.....It is too short!!!!!

Spend and be happy.

One lady at work comes in with the same clothes every day and has been for the last year. She's a mad property investor and millionaire, but getting her to spend a cent is impossible.
 
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10 points to becoming rich

Reply: 3.1
From: Anonymous


To all the tight asses, GET A LIFE.....It is too short!!!!!

Spend and be happy.

One lady at work comes in with the same clothes every day and has been for the last year. She's a mad property investor and millionaire, but getting her to spend a cent is impossible.

You can't take it all with you!!!!
 
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10 points to becoming rich

Reply: 3.1.1
From: Robert Forward


Hehehe... Get a life.... hehehe.....

I know who will be having a very good lifestyle by "Budgeting".

Note: I do not say being "frugal" but budgeting. There is major difference between Frugal and budgeting. If you can't get your personal finances into order who do you expect to get you investing in order.

To me budgeting is a learning issue on how to run my business effectively. Without the basics you lose, ie: go broke.

But there I go again with my thoughts....

Cheers
Robert

The Sydney "Freestylers" Group Leader.

PS: "Be Not Afraid Of Growing Slowly, Be Afraid Of Only Standing Still."
 
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10 points to becoming rich

Reply: 3.1.2
From: The Wife


you big chicken anonymous!

I think maybe the lady who wears the same clothes everyday, finds that property investing is far more important to her than a good wardrobe, so be it, if thats her thing, I'm sure some find clothes are far more important than property.

And then i am sure there are those with "other" priorities.

TW
~Life is a daring adventure, or nothing at all~
 
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Sim

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10 points to becoming rich

Reply: 3.1.2.1
From: Sim' Hampel


On 12/10/01 1:42:00 PM, The Wife wrote:

>And then i am sure there are
>those with "other" priorities.

Yup... I'd much rather spend my money on a ball of twine, a bucket of raspberry jelly and a PalmPilot PDA... they are much more exciting.

Oh... oops... wrong forum ;-)

sim.gif
 
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Reply: 2.1.1.1.1.1.1.2
From: Terry Avery


Eh, what? Sorry Robert but you have confused me. The easiest way to getting
your living costs DOWN to 70% is by earning MORE income? And you are living
on 60% but reinvesting investment income? So doesn't that mean you are
living on 60% of your salary, and therefore exercising the restraint you
spoke of to achieve your goals.

I disagree that earning more reduces your living costs and I will cite a few
examples.

Firstly, and I will paraphrase Stuart Moore here, when the infamous pilot
strike was on the pilot's wanted big increases in salary in order to improve
their quality of life. Stuart at that time was involved in the process. The
pilots achieved their increases after a lot of pain and loss for some and
life was good for a short time. Very quickly however they found that they
were still struggling financially. Secondly, I have a friend who is a doctor
on double my income or more, his wife works and earns a respectable salary.
They often complain of not being able to manage financially. The common
thread here is that people often live beyond their means and often pursue
status symbols as evidence of their wealth. This is not a dig at pilots or
doctors, both are fine professions, but it does not matter what your status
or income, if you spend beyond your means then you will suffer financial
pain.

From what I understand you should pay yourself 10% of your gross (before
tax) salary for investments and reinvest that money. Should you decide to
live well below your means to achieve your goals quicker then 20% or even
30% will be fine. I have been through the stage of life of living off the
credit card and struggling to pay bills. When I finally woke up ten years
ago and started improving my financial knowledge I started investing and one
of the first seminars I attended was Stuart Moore's. He offered down to
earth advice and a plan involving property and shares. He called it getting
rich slowly and I have to say it works. I get very concerned with people
promoting get rich quick schemes and people who come to the forum and tell
of how quickly they have acquired property. I am sure they are not fully
aware of the concept of risk and risk management, having a she'll be right
attitude.

My wife sometimes complains that we live on too tight a budget and I just
point out that we are able to pay our bills, put our kids through private
school, enjoy life with our friends and still be able to build our
investment portfolio. I am making sure our children follow our advice and I
am proud of my son, at 22 he moved into his first house yesterday. He is on
a very modest income but lives within his means and saves well. His goal is
to retire from the workforce at 40.

Yes you have to have balance in your life as well as quality of life but too
often people equate quality of life with status symbols like a Rolex or
Ferrari. For me a reasonable quality digital watch and second hand car serve
the purpose. I don't need to flash a Rolex to show I am a success, I know it
and that is what is important. I suggest you all read The Millionaire Next
Door and The Millionaire Mind, then you will understand where I am coming
from. However, if you have an obscene level of wealth then the cost of a
Ferrari is insignificant and you can indulge yourself with toys, until that
time live within your means and stick to your plan.

Cheers

Terry
 
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Reply: 2.1.1.1.1.1.1.2.1
From: Robert Forward


Hi Terry, what I am stating is that I started with the 10/20/70 rule on just salary income with the goal of replacing my living money income with investment income. Yes I earn good money and of cause that helps. But I run by a budget and live within that, I could however increase my quality of life with the pay rises or by increases of investment income that my properties and other ventures bring in.

I however return my "investment income" into other investments.

Lets put it down in figures.
Note: examples only these aren't my real figures.

Jointly earn $200k after tax

10% is $20k cash pa saved after tax
20% is $40k put towards investments after tax
70% is $140k to live on after tax

Jointly earn $200k (after tax
Income from investments $50k after tax

Total = $250k

10% is $25k saved pa as cash after tax
20% is $50k put towards investments
70% is $175k to live on.

So please note the difference between the 70% figures. The second one is after investment income is added to my yearly income, but I choose to live by my budget at $140k pa. So I am actually living on less then 70% due to my investment income earning more.

I hope you can see where I am coming from this way.

Cheers
Robert

The Sydney "Freestylers" Group Leader.
 
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