When things were booming, when everything was going so well, many thought their speculation/gambling/borrowing ideas were creating wealth. Any small problems or worries seemed insignificant, they’d all go away in time right?
Especially in regards to finances – stocks and home values always go up, right? That may have been the assumption many had a few years ago during the great housing boom. People were going out and buying things – a lot of the time on credit – without thinking about if they could afford it or not; they thought they were living the American dream. When the bills came in, no problem, they just borrowed money out of their home, treating it like at ATM machine, kicking the can down the road, thinking mistakenly that they really were wealthy.
Then the illusion of the American dream turned into the American nightmare. The debt finally caught up with a lot of people, no longer able to kick the debt down the road by obtaining another credit card or borrow against their home, having to actually make payments on their accumulated consumer (bad) debt, having to now make real payments on their homes (the teaser rates on their option arms also reset to the actual rate or cost of borrowing that money) and find a real solution to their self-inflicted problems if they ever wanted to get involved in truly creating wealth and live the REAL American Dream (which is not living off consumer credit, but is instead achieving financial independence and actually being able to afford and pay for those luxuries!).
Now I’m not judging or coming down hard on these people. This in fact was the majority of people across the country who got caught up in the “good times” in some form or fashion, not aware of the fast approaching repercussions.
So if your Objective is Creating Wealth, what now?
If you’re someone who has just realized something needs to change or if you’ve known for some time now that something needs to change so you can start creating wealth but you don’t know how or where to start, what can you do?
Creating Wealth step 1:
When you’ve gotten yourself into a hole, the first rule of holes is: STOP digging!
You first need to assess where you’re at, how much debt do you owe, what are the terms, payment amounts, etc, and compile that along with your income and monthly expenses. You need all that information together in one place so you can see where you are. It should be pretty easy to see where you’re headed if you continue doing what got you into this position in the first place (digging yourself into a hole, the opposite of creating wealth). But if you’ve never even taken a look, you may not have ever realized. Realization and awareness of the spending problem is the first real step.
Creating Wealth Step 2:
Once you can see where the problem lies, ie, you spend more than you make, you need to put together a plan of how to remedy the situation. In most cases, this actually is easier than most people think. The hardest part is coming to terms with it. You may feel that the problem is that you simply do not make enough money, however, you have to be realistic and conservative with your current situation otherwise you’re simply putting more pressure on yourself than you need to.
Compounding is real, and while it’s great when it’s creating wealth and working for you, it can be an absolute nightmare if it starts working against you! It’s a very powerful force of nature! If you don’t cut back your expenses to within your means, the interest, penalties and fees will mount up so fast and compound on top of each other that within a matter of months you can find yourself stuck, unable to escape.
That’s what we want to avoid. The future is bright, opportunities are everywhere. Turn off the news, cut out all negativity in your life because it’s sure not helping! Just getting your finances under control is a super confidence booster.
Not only that, once you’re in control of your finances and living beneath your means, it gives you a chance to catch your breath. You realize that the sky isn’t falling, and on top of that, I’m going to show you a way to start having money become attracted to you. This technique for creating wealth is so powerful, and whether its just a psychological phenomenon or what I don’t know, but it literally turns the tide of your finances and you will find yourself somehow beginning to attract money instead of repelling it.
But it starts with reigning in your expenses. One of the first principles of wealth creation you need to understand is paying yourself first. This isn’t just some cute catch phrase, this is fundamental. You must change your programming, change your habits, change the way you do things, change your relationship with money. It is crucial.
If you ever want to become wealthy or rich, you must think and act like they do. You must pay yourself first. Set aside 10% of your income every time you get paid without thinking about it. Take it out of your paycheck and put it aside, somewhere where you won’t be able to spend it. Or convert it into precious metals like gold investing or silver investing. That makes it that much harder to spend because you have to convert it first.
Paying yourself first is putting that money aside, being responsible with your money, investing into yourself, into your future. By doing this, you will be released from the grasp that money has over you, the fear of losing it will melt away and you are creating wealth. You will have power over money – and that is truly powerful. You will realize that you can live and survive on 90% of what you were living off before; not only that but you’ll feel better knowing each pay check is now helping to build your future instead of just going to pay bills or for entertainment or whatever and each month your wealth can grow.
(I highly recommend you get a copy of “The Richest Man in Babylon” for some truly powerful financial education that in itself can help you establish the true power behind this principle and the incredible wealth it has created for those with enough financial discipline to apply it consistently).
If all you can do is pay yourself first each month, set aside 10% of all income that comes your way, you will change your life dramatically! Do not take the power of this fundamental principle for creating wealth for granted!
To learn more about creating wealth, read the next article in this series: Creating Wealth – 3 Business Building Ways To Take Control And Get Ahead In These Uncertain Financial Times
Originally posted 2010-10-07 06:17:49.