Money is often a subject that no one talks about, yet it’s on everyone’s mind almost non-stop. Depending on your situation, you could either be asking questions such as, “I wonder if this check is going to bounce? I hope I have enough money in the account to cover it!” or, “My 401(k) is fully funded this year, I wonder what else I can do with my extra savings?” I’m just guessing that you’d like to be asking the second question rather than the first! In order to do so, you’ll need to understand the two pillars of money.
The First Pillar – Earn Money
In order for you to acquire wealth throughout your life, you must first have a satisfactory income. If you only earn $15,000 per year and have no other sources of income, money will always be tight, and you’ll most likely not have anything left to invest in the future. On the other hand, if you have a way to earn $100,000 per year, I bet you could find a way to become wealthy and retire without much worry.
The Second Pillar – Save Money
While the first pillar is important, wealth cannot be produced without the second, saving money. As I stated before, if you make $100,000 per year, you have a much greater chance of retiring wealthy. However, if you do not develop the habit of saving, you’ll still have $0 at the end of every year, and have very little to show for your efforts.
The True Path to Wealth
Based on the two pillars described above, there is one sure-fire method to becoming wealthy: (1) Increase your earnings, and (2) Decrease Your Expenses. Let’s say you currently earn $40,000 per year and have expenses of $36,000 per year. If you increase your earnings to $50,000 per year, you’ll have increased your potential savings by $10,000! If instead, you were able to decrease your expenses down to $30,000, you would have increased your potential savings by $6,000! But, what if you could do both?
So many people increase their lifestyle with an increased income, which essentially gets them nowhere financially! Think about it. There are doctors in this world that live in large houses with nice cars, but with their mountain of debt, their net worth is not any more than the teacher on the other end of town!
Learn to increase you income AND decrease your expenses and you will be on your way to acquiring and unbelievable amount of wealth.
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I would add a third pillar 🙂 “Make your money work for you.” That’s really how the wealthy do it. The first 2 pillars are a requirement to put your money at work though as without it, you can’t really grow much.
Making your money work for you can be as simple as an interest account (very low growth) to a real estate investment or others. Einstein said it best, compound growth would the eight wonder of the world.
I totally agree. Getting to the point of generating passive income is ideal. Then once you have all of your debts paid off and your savings on track your wealth just keeps going up and up.
My wife and I are currently getting very close to accomplishing this. We are out of debt and building up our savings. We both have full-time jobs that pay quite a lot more than we need for our expenses. Plus, we both have our own side businesses that we’re trying to turn into passive income. It really is exciting!
Passive income is most definitely the way to go! With the additional funds you could invest or start a systematic business – anything to get that compound growth! 🙂
Bingo. The third pillar is also important but could be included as earnings. What you have described is financial freedom. It doesn’t matter how much you make as long as you spend a lot less. Then if passive income can cover all of your expenses, you are free.
My thoughts exactly! Thanks for the two cents optionsdude!
Saving your money should start early regardless of how much you earn. As your income grows the savings increase.
You’re right krantcents! Saving should be happening always! But, if you truly want to be financially successful, you must increase your income and decrease your expenses. 🙂
I really enjoy the simplicity of this post. Both very true, and sometimes challenging to accomplish.
True! It’s very simple, yet not always very easy. Stick to the basics and you’ll have a better chance of accomplishing those long-term goals! 🙂
I made good money now, but it will be awhile before that significantly changes, unless my blog pays off a bit more…which im hoping! Regardless, I am trying my best to cut expenses, it’s another form of a raise I suppose.
Cutting expenses is much like getting a raise, but it is definitely limited. Keep working on that blog! I’ve stopped by a few times, and I think you’ve got a great future with it! 🙂
Just remember that doing both — earning more and saving more — take time. When you have to choose whether to spend your time saving (clipping coupons, etc.) versus earning (building a side business, freelancing, etc), you’re usually better off earning more.
When it comes to coupons, I have a hard time taking the time to look for them these days. I make too much with my side gig to justify the time. I’d rather just go to the cheapest store and pay less that way. I know I could get more deals with coupons, but the time it takes just isn’t worth it.
But, if you do not have an opportunity to make more money, then perhaps coupon clipping would be a great option! I would actually recommend getting your spending under control rather than going crazy with saving a dollar here and there with coupons.
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