Step 2: Keep Money
Keeping the money you make is the next big step.
You can’t build wealth if you spend every dollar you make.
Your bills make other people rich, so try to avoid taking on unnecessary bills when you’re in the process of making yourself rich.
So how can you keep the money you make?
Build a money plan
Managing bills is the most difficult part for most people when it comes to personal finance. That is why most people are broke.
Most people live paycheck to paycheck and are caught up in the chains of debt. The biggest reason why? Because they are spending more than they are making. Society, in general, encourages SPENDING and CONSUMING.
I’m not saying Spending and Consuming is bad, it’s just that most people fail to set some sort of balance and end up spending more than they are bringing in, digging themselves into a financial hole that becomes difficult to climb out of.
How can you get out of this cycle? By building a money plan! (AKA, a budget)
Budgeting
Contrary to popular belief, budgeting is not restricting. It’s actually liberating.
Let me explain.
Budgeting in order to build wealth might feel restricting initially, but it’s actually liberating over the long run as you will start to put your money to work for you, and in turn, your money will slowly start to make you even more money once you start to invest and spend money more wisely.
Going into debt to buy more things in the short-term might “feel good” initially, but it’s actually financially destructive over the long run as you’ll start to have debt compounding against you. (Which if you know anything about the compounding effect, you definitely DON’T want that force working against you)
Yes, building wealth takes commitment. But it’s totally worth the effort.
Budget Apps
There are a few free apps that you can use to create a budget and better manage your money.
One of them is Mint.
Mint is a great money management tool as you can connect all of your financial accounts, and the app will compile all of your financial data and give you an easy-to-read picture of your financial status.
It’s like having your own financial coach.
The app will walk you through step by step in order to create a budget and financial goals.
Another one of my favorite free money apps is Personal Capital.
Personal Capital is a great tool to track your Net-Worth.
Financial Checklist
Step 1: Create a budget so that you aren’t spending more than you are making.
Step 2: Cut any bills that you can do without.
Step 3: Find ways to increase your income.
Step 4: Pay off any high-interest debt. (4%+)
Step 5: Create an emergency fund for unexpected events. (1-3 months)
Step 6: Invest a minimum of 20% of your income.
“It's not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.”
— Robert Kiyosaki