Want to get rich? Did I get your attention? I hope so.
I’m sure you’ve heard the phrase “if it sounds too good to be true…it probably is“, right? I know I have. Well, I’m going to be a rule breaker and let you in on a little secret that I KNOW for a fact you’ve heard about but more than likely you’re NOT doing. But before I unveil this secret to wealth, let’s talk about what most do instead.
What Most People Do
Back in the day, when I was barely scraping by, I did what most people do when they get paid…I paid everybody else first.
Who do we pay first instead? How about:
- Mortgage company/landlord
- Cell phone company
- Credit cards anyone?
- Private school tuition
- Government/taxes…ugh
So at the end of the month, we are “hoping” for some leftover table scraps to sock away. Sorry to break the bad news to you but this is A@# Backwards (this is a family friendly site).
How Do People Think They Can Get Rich?
Lottery anyone? The #1 way hard-working folks try to get rich in America is by playing the lottery. Powerball that is.
According to a Gallup poll…
- Nearly half of all U.S. adults say they have played the state lottery
- 40% of lower-income Americans have bought a lottery ticket
- 11% of the lower-income say they sometimes gamble more than they should
The odds of winning the lottery are a paltry one in 175 million. Skip it and move on.
Marry a Millionaire
This is interesting…your chances of marrying a millionaire is higher than winning the lottery, and a bit higher than getting hit by lightning… but NOT that much higher.
Fact: People that marry for money typically end up paying for it the rest of their lives. But, if you happen to fall in love with someone that’s wealthy, more power to ya!!
Sue Someone
Typically we are on the other end of the lawsuit stick. We’re not usually the ones suing others, we are the ones that are typically targeted.
A new study published in the New England Journal of Medicine says that one in 14 doctors faces a malpractice suit every year.
Moreover, almost every doctor will face a malpractice suit — or more than one — during his career.
There are a handful of people out there that rather than work hard and save, they’d rather find high income folks (like us) and sue them. Not the best system to consistently build wealth.
Typically all of the above rarely works which leaves us to the one proven easy secret to get rich.
Drum roll please….
Pay Yourself First
I told you that this was something that you’ve heard before. Certainly not original or Earth shattering. It’s true. No matter if you’re a doctor or ditch digger, if you get into the habit of paying yourself first, you are guaranteed to be RICH just like Calloway says….I Wanna Be Rich.
How to Legally Avoid Taxes
Using our little known secret, we can now “legally” avoid federal and state income taxes on the money you earn. Instead of what most do, pay the government first, we NOW focus on paying ourselves FIRST in a pretax retirement account. I’m not going to go over each one here but examples include: 401(k), Simple IRA, and 403(b) plans.
How Much To Pay Yourself
Here’s the million dollar question (literally). How much should you pay yourself first? Again, nothing new but if you pay yourself ONLY 10% of your gross income, before taxes in one of the pretax retirement accounts, you will be VERY wealthy. How wealthy you ask? By simply doing this, you will eventually accumulate more wealth that 90% of the population. Go back and REREAD that last sentence and let it really sink in.
Teaching Our Kids
Dave Ramsey has a great method of teaching kids about money. Once you get into the habit of paying yourself first, consider using his method to teach your kids. He recommends making three envelopes and any money they receive either from working, birthdays or allowances goes into EACH envelope:
- Give
- Spend
- Save
There’s only three things that you can do with money. Save it, spend it or give some away.
Example: Your kid has a birthday party and gets $100 from family and friends (not a bad payday!). Instead of running down to the nearest Wal-Mart and dropping $60 large on a X-Box game, instead break that money up into all three envelopes.
Teach them whatever percentages you want and I suggest:
- Give – 10%
- Save – 10-20%
- Spend – 70-80%
They can STILL get their X-Box game that they wanted but now they see the other side of it, paying themselves + giving to others too. Think about this, if they can start these good habits early, they too will become wealthy at a much younger age.
Thoughts?
What are your thoughts about paying yourself first?
If you are already doing this, what % of your gross income are you using?