Becoming wealthy isn’t always about putting more hours in to make more money, it is often about better money management. Knowing how to manage and use your money wisely can increase your happiness as well as your wealth.
Money is a tool, a tool which if used correctly, can make you more money without you needing to actually work as hard as you may think you need to.
When working in a physical job, whether that is for yourself or for someone else, you can only do so much. People become tired and their bodies become achy. There are only so many hours a person can work before they drop. And that differs from person to person.
Someone who is in their late 70s or someone who has a chronic condition like M.E. cannot put in the same amount of hours as someone who is young, healthy, strong and super fit. The healthy young have an advantage over other people… however, that doesn’t mean that they will make more money.
Spending habits can have a huge impact on a person’s wealth as well as the work they do.
A young person may be able to work 70 hours straight without feeling tired and then party all weekend… but there is a high possibility that he or she will be skint by Monday after they have had a weekend fuelled by drink, possible drugs and kebabs. (Maybe not so much during the ‘rona crisis though.)
An older person who is no longer into weekend-long partying, will not spend their money in the same way. If they were to invest their money on stocks or shares, or even use it to create an income stream… they may never need to work a 70 hour week like the young party animal.
Very often, working overtime for many, is nothing more than ‘topping up’ a struggling bank account. ‘It all helps’ is their motto as they slave away to earn more money to put back into the overdraft.
Money is a tool, and if you use it wisely, it can give you an incredible life… use it badly, and it will turn your life into a living hell. You will become a slave to your job… working hard just to earn enough money to barely make ends meet.
Your freedom will slowly be erased and your identity morphed into one of a wage-slave. You will become a number, a statistic, a worker drone who wakes up in the morning, goes to work, goes home and then goes to bed… only to do it all again the next day… five or six days of the week.
If you are lucky, you may get to do one or two enjoyable things during the week. You may also get a holiday every now and then… but mostly, you will be working all your hours to simply earn money to pay off your debts or living costs.
But it doesn’t have to be like that.
There are ways to make and save money which does not require you to slave away. You can get to enjoy more of life without you having to exchange your freedom for it.
Maybe you will not enjoy total freedom just yet. There may be a year or two of knuckling down, but in the future you can and will have more time and money freedom than most people will ever experience.
Bob Proctor, the self development guru said it best when he said:
“Successful people work 80 hours a week for a couple of years so that they do not need to work 40 hour weeks for years.”
I am not insisting that you do what follows… but it most certainly will help if you want more money and freedom.
1 – Stop Buying Non-essential Items
This is pretty self explanatory. People spend a lot of money on items they do not need. They buy things they want for enjoyment purposes, which is fine, but they can have a devastating effect on your money if kept unchecked.
Spend a week recording all the things you spend money on. Use a notebook or a note app on your phone and write down everything no matter how small or pointless it seems.
You need to understand your spending habits and see what you are actually wasting your money on. I guarantee you will be amazed at how much non-essential and pointless purchases you will make during a week.
If you are one of those who doesn’t go out weekly, spend a month monitoring your spending instead to get a true reflection of your spending habits. If you spend a lot in a week, maybe you too should do this over a month to see how much you really are wasting.
The next two tips will help you to cut down on your non-essential spending.
2 – See Money As Time
This is a super cool trick for stopping yourself from wasting your money. Everything you see which has a price, convert the price into time.
How much do you earn an hour?
If you earn £10 an hour, then that coffee and cake you are thinking of buying at £5 is going to cost you 30 minutes.
The coffee and cake has a monetary value of £5, but it has a time value of half an hour because that is how long it is going to take you to earn that £5 when you go to work.
Do you really want to work half an hour at a crappy job just so that you can spend that money on coffee and cake?
If you enjoy a coffee and cake while out shopping, and follow that up with a spot of lunch and then maybe an afternoon beverage before going home… you can easily spend a whole mornings wage on just food and drink alone.
Does that sound like fun?
If you really hate your job and want to leave it asap, then spending your wages on non-essential small pleasures such as regular coffee and cake sessions and a spot of lunch here and there, is going to keep you in the job longer than you want.
There is nothing wrong with enjoying a treat every now and then, but too many can keep you locked in a situation you are desperate to escape from.
Seeing the price of things as time, time which you have to spend earning the money so that you can afford the item, is a big leveller. It has a powerful effect on your perception of money and what you are spending it on.
3 – Ask Yourself, ‘Do I Really Need It?’
When buying items, it is a good idea to ask yourself ‘do I really need it?’ and give yourself several seconds to think about it.
Even better if you can walk away and think about it for five minutes before going back to it.
Chances are, you want the item but do not really need it.
If that is the case, you are simply spending money on an emotional decision which in the long run, will add more weight to the feelings of discomfort and depression you will experience when you are struggling financially at a time when you really need money.
When the car breaks down when you really need it or the central heating packs up in the middle of winter and you have no money to get them repaired, you will be cursing yourself for wasting money on frivolous coffee and cake sessions.
Buying items on a whim or making emotional ‘I want it’ purchases are damaging to your long term happiness if you are in debt and not earning much that is.
They may seem harmless at the time of purchase, but when you are not mindful of your spending habits, these purchases happen quite often. They slip under your radar and before you have realised, you have spent the equivalent gas bill on clothes, or a credit card repayment has been spent on food.
These small amounts add up. Not just in the amount you have used, but they also add up in interest payments on debts which you could have paid off earlier by using that money more wisely.
4 – Use Any Spare Money You Have Paying Off Debts
Now that you are beginning to realise that you have been spending money on items you do not need, you can put that money to better use. The best use for spare money is paying off any debts that you may have.
If you only pay the minimum repayment amount each month on a credit card or debt, you will spend months if not years paying a lot of money in interest. Had you paid more money into your debts, you would have reduced the debt amount and reduced the amount of interest you have to pay.
Instead of spending £50 on something you don’t need, put it towards a debt reducing the interest to the point that, that £50 now has a value of £75 (example) or more.
If that seems a little hard to understand, look at it this way.
By not putting that £50 towards a debt and spending it on other stuff instead, you would have to pay the full amount of interest on a debt. But if you had reduced the debt by £50, the interest payments would be lower saving you £25 (example) over the next couple of months.
That £50 has now become worth £75 to you.
You have saved yourself £25.
If you put another £50 towards the same debt the following month, your savings will be more than £25… it could be £75. That £100 extra paid towards the debt has now increased in value to £175 (example).
You have saved yourself £75.
Buying items that you do not need while you are paying off debts is costing you far more than the price you are paying for those items.
You think you are only paying £50 on coffee, cake and that funky cool scarf which will go nicely with your new jacket… the same way your five other scarves will… but that £50 is costing you hundreds of pounds in debt interest.
5 – Invest Any Spare Money You Have
If you do not have any debts, buying items which you do not need can still be costing you a lot of money.
Using the same example of £50; if that £50 was used for buying stocks, shares or currency which you could sell later, you could increase the value of that £50 to £100 or £150 or… who knows.
What we do know is that spending money on items which you do not need, items which you may not use or wear, items which are going to gather dust and get in the way… could easily cost you a lot more money in the long run.
Which will rob you of your freedom, and your peace of mind and will keep you securely locked in the self-imposed prison of being a wage slave.
Warren Buffett and Roman Abromavich are both billionaires, and they both spent any spare money they had when they were younger on buying stocks and shares. Neither of them will ever have to worry about paying bills, where the next meal is going to come from or have to go to work in a job they despise with people they don’t like. All because they decided to invest their spare money.
Investing does not always mean buying something in the hope that it increases in value so that you can sell it at a later date for a profit like currency or shares. It also means investing in education or services which will help you to save or make more money.
Spending a couple of hundred pounds on a course or two learning a new set of skills which you can take to the market place and use to make more money than you currently earn, is a great investment.
Investing in yourself is investing in your future.
What may seem like a large amount of money today, can be earned back tenfold, twentyfold or more once you have mastered the skills required and acted on them.
6 – Knuckle Down And Focus On The Above For A Couple Of Years
You will need to decide if this is for you. It can be quite tough and challenging, but it can also be incredibly rewarding and fulfilling.
If you decide to spend the next two years focusing on your money, working towards earning as much as you can, saving as much as you can, and then using that money to pay off any debts you have and invest into money making opportunities… it is possible that after two years you can be completely debt and mortgage free.
Becoming debt and mortgage free after a couple of years will save you tens if not hundreds of thousands of pounds in interest payments. A 25 year mortgage will cost you thousands in interest repayments, pay the mortgage off fast – if your bank will let you – and you will save yourself years of struggle.
Same with loans and credit card debts, pay them off as quickly as you can, and you will be left with more money in your pocket for longer.
Two years may sound like a long time, and it will feel long when you are really focusing on mindful use of your money, but in reality, that time will fly.
Think about something that happened to you last year, doesn’t seem that long ago does it? It probably feels like it happened only yesterday. Time flies when you don’t focus on it.
The two years of hard work and being money mindful will soon be over. Whatever pain and hardship you felt during that time will easily be outweighed by the benefits. The benefits of working two years to clearing your debts and giving yourself a better financial position will last for many years.
Remember that quote by Bob Proctor?
“Successful people work 80 hours a week for a couple of years so that they do not need to work 40 hour weeks for years.”
Being incredibly mindful of your money and spending habits now… will reward you with big dividends later on.