The Key to Wealth: Pay Yourself First
Many people spend a lot of time trying to discover the key to wealth, or how to become rich.
In 1926, George Clason wrote a book called The Richest Man in Babylon — one of the greatest success classics of all time. It’s the fabled story of a man named Arkad, a simple scribe who convinces his client, a money lender, to teach him the secrets of money.
Becoming rich begins with a few simple rules…
Pay Yourself First
The first principle the money lender teaches Arkad is: “A part of all you earn must be yours to keep.”
He goes on to explain that by first putting aside at least 10% of his earnings — and making that money inaccessible for expenses — Arkad would see this amount build over time and, in turn, start earning money on its own.
Over an even longer time, it would grow into a lot of money, because of the power of compound interest.
Harness The Power of Compound Interest
If you’ve never heard that term before, compound interest is what happens when you earn interest on your savings, and — when left in the savings account — that interest begins to earn interest of its own. Given enough time, the earning power of that interest compounding on itself will eventually turn a small amount of money into a fortune.
Compound interest is one of the key reasons why paying yourself first – and starting early in life — is so essential if you want to accumulate wealth. We’ll talk more about that in a second.
Learn How to Invest
Now, the world’s most aggressive savers pay themselves first and make investing money as central a part of their money management as they do paying their mortgage.
To get in the habit of saving some money every month, immediately take a predetermined percentage of your paycheck and put it in a savings account that you don’t allow yourself to touch. Keep building that account until you’ve saved enough to move it into a mutual fund or bond account or to invest it somewhere else.
Investing just 10% to 15% of your income will help you eventually amass a fortune. Pay yourself first, then live on what is left.
This will do two things:
- It will force you to start building your fortune and
- If you still want to buy more or do more, it will force you to find ways to earn more money to afford it.
Never Dip into Your Savings to Fund a Bigger Lifestyle
Never dip into your savings to fund your bigger lifestyle. You want your investments to grow to the point that you could live off of the compound interest that accumulates, if necessary. Only then will you be truly financially independent.
Start Paying Yourself First Today
Keeping this idea of paying yourself first in mind, I want to leave you with a bit of homework to complete. Calculate what 10% of your income is, and commit to saving that much — no matter what!
To hold yourself accountable, leave a comment below with the most important thing you could start saving for. Is it your retirement? The ability to eventually quit your job and start a charity? Or maybe you need financial independence in order to start a brand new career doing work that you’re passionate about. I’ll follow up with you to make sure you’re staying on track!
Paying yourself first doesn’t have to stop with money. Learn how self-improvement and learning will pay dividends in your life. By improving yourself, you’ll attract more and more success into your life. You can begin to improve yourself by beginning to include positive affirmations in your life. They are the foundation for all self-improvement and positive thinking.