Top 14 things you should start doing immediately to get rich - pay yourself first

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Note: This is the first post of 14 consecutive posts from 2nd to 15th of April about how to get rich. Check back daily or subscribe to the RSS feed

There probably isn’t a person in the world that does not want to be financially free. The idea that one day you have enough money to do whatever you want thrills everyone from children to grown ups.

But as we all know - some of us make it rich and some of as don’t.

The laws of success are universal and by following them carefully it is possible for anyone to get rich.

Today I am going to talk about the most important rule on getting rich:

Pay yourself first

This is the single most important and also most overlooked principle on how to get rich. The concept of “pay yourself first” is so easy that even a 3 year old can understand it but few of us are actually using it.Most people think that getting rich can’t be as simple as paying themselves first and tend to skip this step.

BIG MISTAKE! Not following this principle automatically reduces your chances of getting(and staying) rich by 90%. In fact I would go as far as to say that if you are not willing to start following this principle there is no point in reading this post any further - you will not get rich. Go back to work!

What does it mean “pay yourself first”?

Each and every time you get paid, immediately take a portion of your money and set it aside - you can not spend this money. This is the money that is going to make you rich. You can simply save this money on your bank account or better yet - invest it wisely.

This money is going to generate interest and grow your investments. The compounding interest from your money will eventually be more than the money that you have set aside. Albert Einstein didn’t say “The most powerful force in the universe is compound interest” without a reason.

Remember: It is important that immediately after getting paid you should put aside an amount of money that you have predetermined. It is of the utmost importance that you do this before paying any bills, shopping or spending some of the money on something else. Whenever people decide to start saving money they will usually pay for all their bills first and then live as frugal as they can only to discover that they have spent all their money and there is nothing to set aside. It doesn’t work this way!

The natural law of money says that our spending habits will expand until we spend everything available. For example if you have 1000 dollars until the end of the month you will spend it all by exactly the end of the month. If you put aside 500 dollars from your paycheck immediately after receiving it you will have only 500 dollars left until the end of the month but this will almost always be enough. In fact depending on the amount of money you set aside you might not feel any difference. The only difference will be that in the end of the month you have some money set aside that otherwise wouldn’t be there.

By paying yourself first immediately after getting your paycheck you will make sure that you will stick to your plan of collecting money - Always sticking to the plan is the best way of realizing your goals and getting rich.

The government pays himself first

The government also uses the pay yourself first principle in order to secure the money that they have already budgeted for.

Have you ever thought why does the government take taxes from your paycheck before you get paid?

They are simply making sure that they will get their share of the money. If you would have to pay your taxes in full at the end of the month with the money you have left from your paycheck there would be awfully lot of people who would not be able to pay. If the government uses the pay yourself first principle why shouldn’t you?

How to pay yourself first

The easiest way to start paying yourself first is to open a separate account where you can deposit your predetermined amount of money from your paychecks. It is also a good idea to make sure that it is not easy to spend this money.

If you are using online banking it might be possible to set it up so that the transfer to another account is made automatically after receiving the paycheck. If you can do this it is highly recommended. For example my online bank is set up to transfer a predetermined amount of money every month to an account with a brokerage firm. It saves me the hassle of doing it myself and ensures that I follow the pay yourself first principle of getting rich.

Always remember that part of your money belongs to yourself

If you spend all your money by the end of the month it means that all of it belongs to someone else. What’s the point of working for money when it does not belong to you?

The reason that you are already not rich is probably because you do not follow this principle. You might know it, but that’s not enough. In order for it to work you have to use it!

Check back tomorrow for the second most important principle of getting rich.

Posted in Eliminating Debt, Goals, Philosophy, Saving money, getting started, success | 4 Comments »

How the falling dollar hurts bloggers and web based businesses outside the US

Lately there has been a lot of talk about the US economy coming to a recession. Some analysts are saying that the US is in a recession but others don’t agree. The only agreeable thing is that the dollar is falling.

In some aspects the falling dollar is a good thing for the US - it means that products made in US are cheaper compared to the things made in other countries. This in turn enables the US companies to sell their goods with better prices as compared to their competitors. On the other hand it also means that for people living in the states it is more expensive to buy foreign products. This can make everything starting from bananas and finishing with foreign cars more expensive for the US consumer.

In the long run the falling dollar is a bad thing. Nobody wants to use a currency which simply put vaporizes.

Lets imagine for a moment that you are the Central Bank of China and you decide to put 1 billion dollars in a safe. When you open the safe 3 years later you have only 700 million dollars left(no smartass, nobody took the 300 million - it just vanished).
This is what is happening with the for at least three years dollar - the longer you keep it the less it will be worth. This is why countries like Iran don’t want to use the dollar for selling oil.

But what about the bloggers?

Bloggers and online businesses are relatively safe - as far as they make and spend their money inside the US. The same is actually true for online businesses that make their money on markets that have no direct link with the dollar. Markets like this could be the European Union, Asia, Australia and basically any market which allows for a web based business to operate without buying or selling any product that has anything to do with the dollar. So that is the good news - most online businesses are relatively safe.

The bad news

The bad news is that there is a group of bloggers and web businesses that are hurt daily because of the falling dollar. This is the group that make their money in dollars and spend it in other currency. If you live in England and have a website that makes money selling products or services to people in the US you are actually losing money every day.

The easiest way to understand this is by imagining a blog such as the one you are currently reading. What I do is write articles about the things that interest me and hope that people with similar taste will find them. Each time somebody visiting my blog decides to click on an ad I make a small amount of money.

Most of the people on my blog are from the US and the advertising program I use pays me in dollars which is the case with all advertising programs that I am aware of. The problem is that I live in Estonia - a small country in the European Union. Our money is directly tied to the euro. Within the last 3 years the dollar has fallen more than 30% compared to the euro. This means that while you make the same amount of dollars with your online business you can buy 30% less stuff for it in the EU. So basically just to stay even you would have to increase your income 30% to keep the same living standard.

The falling dollar is actually improving some businesses who operate from the US but make their money elsewhere - the amount of euros(or other currency) they get their income in translates day after day to a larger amount of dollars.

While it is difficult to say if there are more US companies getting their income abroad or more foreign companies who get their income from US it is definite that the falling dollar is hurting bloggers around the world. The reason is simple - most advertising programs are based on dollars. The only way to stop hurting bloggers is to use another currency.

Posted in Currency, Investment principles | No Comments »