For most people, increasing wealth is less about cutting back drastically, and more about capturing opportunity—but you must identify for yourself what opportunities motivate you.
What happens more often than not is two things:
- If you don’t feel like you have something specific motivating you to save money, it slips away
- If there is excess money hanging out in your checking account, it gets spent—and probably on something random and uninspiring.
Here is what I want you to resolve to do this year:
Make more and KEEP MORE of your money; and
Spend your money on things that inspire you.
Create more wealth
I tend to work with a lot of brand-new entrepreneurs. I always ask, “How much do you need to make?” The answer is some variation of “I need to make $80,000, I’d LOVE to make $150,000 but I can make it work for $40,000.”
Guess which number they end up making?
I always walk people through an exercise of estimating their expenses, upcoming costs, taxes, savings, to see what they should be making and how that translates into an hourly rate. A lot of them shy away from that number, which means they decide to NOT charge what they need, and settle for what they get.
Resolve that going forward, you’re going to build wealth and profit into your income.
If you’re an employee, start figuring out what your next move will be this year. One of my clients was motivated to get a better job after working with me, and increased his income by $20,000—enough to max-fund a 401k at $17,500. He says there is even less stress than with his old job—so if you have a story that you might have to work harder to make more money…it might not be true.
Keep more wealth
Employees have an advantage over entrepreneurs in that with a consistent paycheck, they can automatically save. If you don’t have the opportunity to automatically save through work, you need to automate it from your checking account and make it a non-negotiable. I auto-save for my basic cash reserve, auto maintenance fund, travel fund, tax fund and retirement fund.
Start small. Commit no-brainer amounts at first, and then just start ticking it up by a few dollars every month (great way to knock out debt too). Before you know it, you’ll have saved lots more than you ever thought you could.
Spend your money
If you use Mint, have you ever gone in and looked at an entire year of spending all at once? We burn through a lot of money just living. It’s okay, we’re supposed to. What gets me is when I spend money on things that don’t matter. Which would you rather have: unlimited restaurant eating or a one-month sabbatical? A full cable TV package or a nice vacation?
Get over the idea that you want to be in a place where you don’t have to choose. Out of 120 people in the past year, I worked with about 5 people who were in the position of not needing to prioritize because they made so much money. That’s less than 5% and plenty of my clients make upwards of the $250,000 range. Having to prioritize doesn’t mean you’re not successful, you just know where you’re starting.
You might not make the same choice every month—I spent WAY too much on books last month—but you can commit to returning to consciousness and spending money on higher experiences.
Take a moment and write down the experiences or things you want to have this year. How much do they cost? How do you plan to fund these? Work out a short-term plan so that you know if you’re on track going forward.
Actions This Week
Give yourself some time this week to map out your expected income, expenses and special costs coming in the next 12-18 months. Open a high-yield savings account to capture excess cash flow. And raise any existing automatic savings by a percentage or a few dollars. It will be absolutely painless, but it will make all of the difference to you a year from now.
P.S. If you want to get into the wealth mindset, one of my most popular posts is right here. And if you’re feeling some resistance to making more or charging more, this post might help. And here’s a reminder of the behavior that makes the most difference for people who want to build more wealth.