Many years ago, I started to look at my wealth accumulation process after reading this book called The Richest Man in Babylon by George Samuel Clason.
This is one of those book that helps me to kick start my savings and investment journey. It helps me understand how to save and to how to accumulate my wealth. After reading, I apply some of the principles and I found them pretty effective in helping me in wealth accumulation.
Here I will share the 3 key points that I picked up from the book and how it has helped me:
Always Pay Myself First
I used to payoff my monthly obligations and commitments first every month before I try to save any money. However, using this method, my bank account doesn’t seems to grow at all. No matter how much I earn, money seems to have a way of leaking out of my account. It seems like there is a secret leak somewhere in my account.
After reading the book, I commited myself to save first. Meaning no matter how much I earn that month, I will have set aside some amount to save first. At first, I ask myself if this is even possible? I have been struggling to save in the past, how will I have enough for myself to spend?
There and then I decided not to think too much and just go ahead with the idea.
Indeed, it was very difficult for me to save first and spend the rest. I discovered that the only way out for me is to cut down on those expenses which I had and were not so essential and necessary.
Furthermore to ensure that my plan will work, I opened up a new banking account. This is what I call a “one way street account”. Meaning the money will only flow into this account and the money stays in there. I will not “touch” the funds in this account unless it is for investment purposes.
Soon, I started to put money into the account every month without fail. At the beginning of each month, I will look at the amount of income that I earn, and then I will put some into this account first before using the rest of the monies. At first I can only save $50 to $100 per month. Slowly, I find myself able to save in thousands. This way, my savings starts to grow and soon I have the capital to invest and make my money multiply for me.
I find this method very effective, as I force myself to save first. Then with whatever that I have left I will have to spend within my means. This way I will guarantee that I will definitely save some amount no matter how small it is.
Make My Money Work for Me
This is one revelation for me. I have been working hard for many years, and I though that by working hard, I will definitely be financially free. However, I have seen some of the close people around me working hard, but in the end, they cannot retire bring financially free. They are hardworking people, yet they cannot have enough to retire. Its really not their fault, as they may not be financially savvy to know how to be financial free.
Don’t get me wrong here, I do believe that working hard is one of the ingredients to finanically free, and if I can combined that with proper financial and investment knowledge, it will assist me to be finanically free faster.
From this book I start to understand that money never sleeps. As long as you have invested prudently and properly, your money will work hard for you. It is just like you have another you, work hard and earning money for you.
With more money from investment, the money can produce more money for me. So it a compounded effects. The returns will be growing exponentially with time.
Of course, do invest prudently and within your risk appetite. For me, I invest in instruments that I am familar with.
Track our wealth
I need to know how much I have currently and where I want to be financially. Starting with an end in mind help me to track periodically where I am and how far am I from my goal. So I can plan ahead or readjust my investment portfolio to achieve my goal. One suggestion is to keep “portfolio/net worth sheet” to track what you have.
Conclusion
I always remind myself that all the above 3 pointers can only apply if I am earning money. The first step to wealth accumulation is earning money. So I make it a point to work hard at what I am doing. I can be a super (money) saver, yet with limited income, there is still a limit on the amount that I can save.
Therefore do consider how you can increase your income. Of course, if you are a super income earner and a super saver, the wealth accumulation process will be a very successful one.