How to Acquire Money

How to Aquire Money - Pay Yourself First

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To get started on your journey to reach financial independence you will need to find a way to generate savings. To do this you will need to tap into your most important asset - that is you and your earnings power. The act of saving creates your first income stream.

What is the easiest and most effective way to save?

Pay yourself first: Save a minimum of 10% of everything you earn.

You work hard for your money. You deserve to get paid first.

"Don't save what is left over after spending,

but spend what is left after saving." Warren Buffett

Is it really this simple? Yes.

For example, if you take-home pay is $4,000 per month you need to save a minimum of $400 per month.
Next, pay all your needs - rent, utilities, groceries etc.
Whatever is left can then be used to pay for wants - eating out, entertainment, travel etc.

Leverage technology: When each pay cheque is deposited, have your bank automatically transfer your pre-determined savings amount into your savings and/or investing accounts.

What is surprising is you will not miss the money you are now saving. You will adjust your lifestyle - and you will be just as happy.

You are in control of how much you save

Savings = Income - Expenses

There are two basic ways to grow your savings:

Grow your employment income.
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Reduce your expenses.
- You are in control of your expenses. Reducing expenses is the easiest way to boost savings.
- Understand the difference between needs and wants.
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Saving/spending money is a skill

Like any skill, with a little thought and effort you can get much better at it. The less you spend the more you save.

Understanding the difference between needs and wants

Needs: things you must spend money on in order to get by.
Wants are more personal. These are things you are spending money on that aren’t essential to your day-to-day living.

Lots of people think their wants are needs. As a result, these people are not able to save money. Having a higher income does not help - wants are insatiable.

Understand how you are spending your money. Identify items that can be reduced or eliminated. This will make it easy to set and grow your savings number.

How to think about saving money

Many people associate the act of saving money with sacrifice or deprivation. It will be hard to save if you have this negative mindset.

There is a more healthy way to think about the act of saving. When you save you are actually spending your money on something. You are choosing to buy a piece of your financial freedom.