2. Keep track of your expenses. Use spreadsheets and record every expense you incur day to day. For each expense, write down the date, description, and amount. At the end of each month, compare the total expense amount with your income streams, such as salary. You can also categorize the expenses, such as credit card repayment, food and beverage, travel, and luxuries/"wants". Draw up charts to help you understand your spending patterns easily. By having such data and charts, you can decide how and where to control your spending habits to better motivate yourself to (a) increase the amount of cash to save or invest (b) think of ways to increase the number of income streams. I have an Excel spreadsheet which is pretty good for such a purpose. Contact me if you want a copy.
3. Increase the number of income streams. An important mantra of many rich gurus like Robert Kiyosaki and Spencer Johnson. Streams such as salary, rent, dividends and investment returns are some examples. Why is this important? Well, look at the opposite. Most of us have lots of expenses; expenses coming from your basic necessities, loans, bills, family commitments and so on. Compare this with the number of income streams you have, isn't it very unbalanced? Think of the problems that will arise if and when you happen to lose that stream of income. Reduce that risk by thinking of ways to increase income streams. Getting another job is one way, but not a very wise one. Try owning properties and collecting rent from them. Invest in a business venture or the stock market.4. Carefully choose the form that your assets are stored in. Do you keep a lot of cash in a savings account? Or do you have it in gold, stocks, mutual funds, or under your bed? Where and for how long you maintain your assets will determine how much you are potentially growing or at the least avoid being eaten by the inflation rate. Inflation makes your spending power and the value of cash and other assets depreciate over time. Don't be caught by surprise when you realize that your $10,000 in the bank is worth $1,000 in 15 years' time. Study and plan where the cash should be stored, or invested in.
5. Give it away! Not all expenses are bad ideas and be avoided at all costs (no pun intended). A good habit to have is to ask yourself whenever you are about to spend: is my money leaving my pocket with the possibility of returning later, and maybe even more than before? Identify ways and chances when you can actually spend money to get more in the future. It could be buying some antique collection, or buying a piece of land. It could be paying for a nice car, but actually selling it at a higher price the next day. Lastly, believe in the mantra of good karma: giving your money and assets to needy people or to your religious authority will reward your kind deeds. Give freely even if there will be no returns. Feeling happy about it is already a good thing!
This is not a list to help you to get rich. The purpose is to be financially independent or financially free, meaning you don't have to depend on money as much as before or not at all. If you do happen to lose some or all of your assets, you won't be very worried about the loss and you would know exactly how and when to make it up.
When you are financially independent, you take out one big worry in life and have more of one of the most important resources in life: time. Time is precious and most of us have less than one hundred birthdays to celebrate.
Think about that.
Links:
bloggingstocks - Your first $10,000: Getting Started
<URL:http://www.bloggingstocks.com/2006/12/20/your-first-10-000-getting-started/>
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