A Part of All You Earn is Yours to Keep

Part of my goal with this blog is to show people how it is not difficult to turn existing financial plans into innovative and rewarding concepts that can maximize wealth, minimize tax, and maximize cash flow.

However, where does someone start when they are at the very beginning of their financial journey? It is always tough to take the first step.

One thing that is a fact about our habits when it comes to spending/saving habits of the average Canadian is that more often than not the majority of cash flow that we earn goes to someone else. The first thing that you might think of is the obvious: taxes, mortgage, debts, etc. However, consider the money that is going to entertainment, groceries, vacation, consumer spending, etc. It is all money that is making some entity other than yourself wealthy.

If there is anything left over than perhaps it may go into an RRSP or a high interest savings account for emergencies. More often than not emergency funds are liquidated for renovations, new cars, etc leaving you at square one. Not only that but most RRSP contributions are done at year end with what is left over. This doesn't usually amount to a significant savings.

Here is the concept I want to illustrate:

PAY YOURSELF FIRST

What does this really mean?? It means taking a portion of your income (let's say 10%) and put it away for yourself before the other people come to the door. More often than not you will see that you do have the cash flow to develop these rewarding habits.

These are basic concepts that build the foundations of authors like George C Clason and David Chilton

I have used the term dollar cost averaging in my blogs. This concept takes equal monthly contributions to the same investment regardless of cost. This way not only to you benefit from lows in the investment but you investment also grows on the highs. Wisebread has a 'for dummies' explanation here I highly suggest a read.

The point that I want to get across with the use of dollar cost averaging and the idea of paying yourself first is this:

While there may be better strategies and tools for you to save tax and grow more wealth, the habits that you develop in the early stages will help you recognize how to move ahead towards the future. You will be surprised how quick your investment will grow when fed properly.

Here is a quote directly from The Richest Man in Babylon:

"Wealth, like a tree, grows from a tiny seed. The first copper you save is the seed from which your tree of wealth shall grow. The sooner you plant that seed the sooner shall the tree grow. And the more faithfully you nourish and water that tree with consistent savings, the sooner may you bask in contentment beneath its shade."

Now if you are able to connect this financial concept to the concept of growing your financial knowledge along the way not only will you become wealthier but you will also become smarter with your money altogether.