I hated doing this…
Yet, everybody swears that this is how you should start your wealth creation journey.
…But it didn’t work for me.
What am I talking about?
I’ve seen a few articles appear recently that promote budgeting as the essential process you need to go through to create more money in your life.
I have to completely disagree and I’ll tell you why shortly.
You take any financial planning book in bookstores and they all regurgitate the same advice – that if you want to retire someday you’ll have to begin by budgeting.
You know the drill… List your expenses, count your pennies, limit your spending and save your way to wealth.
Here’s the biggest reason why I believe budgeting doesn’t work…
The focus of it all is paying everyone else first.
The landlord, the phone bill, credit card companies, etc, etc, etc.
The other reason it doesn’t work is that your focussing on expenses and not revenue.
With expenses, there is a limit to how low you can go. When you focus on revenue, the upside is unlimited.
It’s the same deal when you go and see your accountant – it tells you to make more money, focus on cutting your expenses.
I can tell you from experience, focussing on expenses will not make you wealthy.
However, this does not mean you can be silly about expenses.
…but, as a starting point go for revenue first and then trim back expenses accordingly.
Here’s a strategy that I used several years ago which helped me.
Every time you get paid, make a profit or come into money from any source, put a fixed percentage of it into a savings account right away.
Pay yourself first before you pay anybody else, especially those damned bills.
Initially that could be 10% to start of with.
The next thing you need to do is set this up as an automatic process from one account to another without you having to physically do it every week.
Next… you focus on raising your income.
If you work for a living, look at how you can ad more value in your workplace. If you can’t do that, then look at starting a small business online where you can make an extra $100 – $200 a week.
If you don’t fancy that, then perhaps look at trading, or maybe even look at buying cashflow positive properties.
Whatever it might be, look to increase that 10% that you pay yourself.
Here’s what will happen over time…
That 10% can go from $20 a week to $50, $100, $200, $500, $1,000. Whilst the 10% remains the same, the amount can grow dramatically.
Keep your expenses steady through this period, and you’ll find yourself in a position where you’ll be able to use your savings to start leveraging even more by getting in to specific investments.
That’s when your wealth can double, triple and quadruple fast.
So to recap… If budgeting hasn’t worked for you, it’s because it’s focussing on the wrong aspect of wealth creation.
Pay yourself first.
Do it automatically/electronically.
Then increase your income.
Get into appreciating assets sooner rather than later.
…and budgeting as a concept will be gone forever – out of your vocabulary.
If you’re not doing this now, try it. You’ll be amazed at how fast your personal investment account grows.
Signed with Success,
P.S. You can’t grow wealth by budgeting. Focus on revenue, keep expenses in check, pay yourself first… You’re worth it.