This is not about greed, it is not even about wealth necessarily. It is about return on investment, that is the investment of your time. I suggest that everyone visit the library or Amazon.com and look into getting a copy of this book. The book was written by George S. Clason in the 1920's but it is still relevant today.
The basic principles as I understand them are that "A part of all you earn is yours to keep," and trust your investments to experts. The concept is that you keep at least ten percent of all of your earnings for your entire working life. So for example, if you earn $30,000 at your job, live as if you earn $27,000 and bank the $3,000 every year. If you earn $50,000, live as if you earn $45,000 and bank the $5,000.
It is not enough to just bank the money though, you need to make it work for you. That is very difficult in today's economy because of the very low interest rates payed by banks. This is where the advice about seeking expert help is so important.
Many of us will make the excuse that we need every penny that we earn to live on. The RMIB theory tells you that you need every penny of the 90% to live on and that you owe it to yourself to pay yourself the 10%. Over the years, the savings compound and your return on investment of time becomes your wealth.
Consider yourself a personal corporation with your earnings as your revenue and your savings as your profit. If a corporation achieves a 10% profit margin, that is not very favorable but at least it is profitable. Why should the expectations be less for an individual. Shouldn't your "profit" be at least 10%. By all means, you should not be operating in the negative.
Pick up a copy and read The Richest Man in Babylon. It is worth the investment of your time.
1 comment:
Well said!
Reading this book changed my life when I first picked up a copy 3 years ago. By following the advice in the book (a part of all you earn is yours to keep, pay yourself first) instead of living paycheck to paycheck with no savings to show for it I now have substantial savings which are growing every payday.
The timeless advice in this book is actually easier than ever to apply in the modern world. You can instruct your payroll department or your bank to automatically pay a percentage of your salary to a separate savings account each payday. So all you have to do is set up a separate savings account which is NOT linked to your debit card and make the arrangements to pay 10% (or as much as you can afford) once. Set it and forget it. The rest happens automatically.
The main objection I have encountered from friends with whom I have shared the tips from 'Richest Man in Babylon' is that "I don't earn enough to save 10%." However the book covers this point and explains how everyone who says this is equally broke on payday yet they all earn different amounts! This proves that the objection is a false one and that the Plan will work for anyone who applies it consistently to their finances.
Unfortunately some people will never accept that the Plan will work for them and lack the insight to give it a try (this is also covered in the book.) Those people really can't be helped. But for those who do apply the Plan you can see a new light in their eyes after they get the financial plan set up and working for them. Once the Plan is in place by people who are smart enough to 'get it', they never ever look back.
The amazing part is that I live even better on what is left than I did on the 100%. I've now raised the amount I "pay myself" to 30% and I'm not on a particularly high income and I live in Sydney. And I still have "coins left over to jingle" (as the book describes it)by PayDay, whereas before I had a financial plan I was always broke by payday and had zero savings. If the Plan works for me it would work for anyone who earns any income whatsoever.
I recommend that everyone read a copy of this amazing book.
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