1. Pay Ourselves First
(“Start thy purse to fattening.”)
When Bansir and Kobbi seeked the advice of their very wealthy friend Arkad he tells them a story. Arkad was once a poor scribe who made a deal with a rich man to find out the secret to wealth in exchange for his work on a clay inscription. The rich man gave him a very valuable advice
Although this is a very subtle message it is very powerful in accumulating wealth. We cannot accumulate wealth if we do not save what we earned. We can do that by paying ourselves first and foremost before we spend any of the money we have earned.
Did you ever wonder why the U.S. government takes taxes on our wages before we can get to it? The U.S. government (IRS) knows this law well. This is why we must be vigilant to pay ourselves first with every money we earn. The book recommends that we pay ourselves 10% of all that we earn. For every dollar that we earn, 10 cents should go to pay the person you see in the mirror every morning. You may call it the “Me Tax” if you like. The difference between rich financially stable people versus poor broke people is knowing this first rule. Wealthy people pay themselves first and poor people do not. Before we start paying others or start spending the money we earn we need to pay ourselves first.
“If you have not acquired more than a bare
existence in the years since we were youths,
it is because you either have failed to learn
the laws that govern the building of wealth,
or else you do not observe them.”
"A part of all you earn is yours to keep.
It should be not less than a tenth
no matter how little you earn.
It can be as much more as you can afford. "“Pay yourself first”
2. Live below our means. (“Control thy expenditures”)
Controlling our expenditures enable us to make good use of the money we have left over after we have paid ourselves. There have been many advice on frugality over the years but I think it will not solve the problem for the majority of us until we truly define what money is to us and also define the difference of need vs. want. I wrote about this on the guide to becoming smart about money.
“Budget your expenses so that you may have money
to pay for your necessities, to pay for your enjoyments
and to gratify your worthwhile desires
without spending more than nine-tenths of your earnings.”
Many of us have the habit of spending more as we earn more and it’s not unusual to see someone splurging and suddenly their expenses go up as they start earning more. For example, if we suddenly have a $2,000 – $3,000 raise it is best to maintain our current expense level as if the raise never happened. Instead we can tuck that extra money away into our savings or investment. Controlling expenditures will mean living below our means. When we live below our means we accumulate wealth faster. We can think of it in this way, our earning power is our ‘offense’ and controlling our expenditures is our greatest ‘defense’.
3. Make our money work for us
(“Make thy gold multiply”)
I believe this lesson is about investing our money and letting it work for us. I personally believe that each and every one of us should think about investing only after we have built our savings and an . After we have accumulated 6-8 months worth of expenses in our Emergency Fund it is only then that we should consider about investing our money on other investment vehicles.