Since I’ve started working at the U.S. Dept. of Agriculture and getting steady paychecks, I’ve gotten become conscious of my cash flow. I want to be more financially responsible and grow my wealth. So I went to the Barnes and Noble bookstore and browsed through aisles. Found this bestseller and bought it. Man, I really learned a lot from this book—-common sense, advice, and wisdom make up the most part of this book. The book explains that being rich and being wealthy are not the same thing. It’s “Income vs. Consumption.” You may be earning more than 100k (only 5% of all Americans earn more than 100k) but you spend on a lot of things (consumption), such as 60 inch tv, fancy house, 2 or 3 different luxury cars, pool, and so on. These prevents you from becoming wealthy. You may look “rich” to your peers but inside, you’re really not.
The book has a formula of how wealthy you should be. (I left my book at home so I’ll look up the formula again) The big key to become wealthy is to “live below your means”. That means don’t overspend your income earning and try to have the widest margin between spending and saving as much as you can. The less you spend, the more you can save. Then your money begin to accumulate and build wealth. That’s all there is to it. But we are in the capitalism world and we’re surrounded by marketing—billboards, tv commercials, even competition with your peers who just bought a brand-new car or a big screen tv.
It also talks about Offense and Defense. We have to defend ourselves from those marketing pitfalls. Offense is accumulating wealth while defending against spending on items. I learned more about taxes and why people are always trying to avoid paying taxes. I realize that the government really takes a big chunk of your money (approx. every 30 cents of a dollar goes to the government), so the best you can do is to minimize your income taxes.
To do that, start investing in tax-deferred accounts such as 401k, TSP (Thrift Savings Plan for those who work for the Federal), IRA (Individual Retirement Account). Your paychecks will be deducted first before tax is charged. I plan to invest in these accounts as soon as I build up my savings account first (for emergency).
Finally, if you’re 25 years old or less, like I am, USE YOUR AGE AS YOUR ADVANTAGE because the younger you are, the more you are able to accumulate your wealth over time. So that’s what I’m gonna do. Start investing early and live below my means. That’d be a struggle for sure and takes some time to become used to it. My goal to be financially independent before I become 50. :-)