Here are the two basic concepts in acquiring wealth. The first one is: for every 10 coins
that you earn, pay yourself one coin first and then spend the rest of the nine coins.
Don't spend the coins at the supermarket, don't spend the coins at a restaurant, until
you have payed yourself that one coin first and then you can spend the rest of the nine coins.
Now... I see two kinds of butt-hurt behavior emerging from this. The first one
is going to be something like this: "Well, did you really have to tell us that we need
to save in order to, um, acquire wealth?" Yes. I have done technical analysis, fundamental
analysis, let's look at the PE ratio, let's look at this, let's look at that for years
now. And as I was reading The Richest Man in Babylon last night, this idea was one of
the biggest paradigm shifting ideas that I've had in a long time in regards to acquiring
wealth. So for you to come to me with a clear conscience and complain like that, this is
what you must have done. You must have for years now religiously put away that one coin
out of ten every month, every month. You never said, "Oh, I don't have enough funds this
month, so I can't do it this month." No, you did it every month religiously and then after
years of doing that, you can come to me and tell me, "Well, this is just basic stuff."
But here's the thing, if you indeed are that person, you will be the least likely person
to come to me with that complaint because you have cultivated a huge appreciation for
that particular concept. Now... Here's the second part of the butt-hurt situation. It's
going to be something like this, "Well, I, I can't, I can't, I can't do it. I have to
pay for this, I have to pay for that. I can't put away that one coin." Here's the thing...
If you make a salary of $3000 a month, and your employer calls you in and he says, "You
know what, our business isn't doing so well and so what we're going to do is pay you $2700
from now on." Don't tell me that you won't be able to make ends meet. You won't be homeless,
trust me. In fact, it probably won't affect you in any way. You won't even notice it.
So, again the first concept... For every ten coins that you earn, pay yourself one coin
first, and then you can spend the nine coins. The second concept... As you start doing the
first concept, you'll be accumulating money. Now what you have to realize is this: money
is a commodity that generates profit just like any other thing. If you had a house,
you wouldn't let it sit for thirty years and let it rot and not rent it out. And rotting
is what's going to happen to your money when it's in a bank account with inflation. But
with the house it comes to you easily, "Of course, we need to rent it out." Well, the
same thing is true of the money. So let's do a little bit of calculation... If you don't
follow the first concept, what's going to happen is after thirty years, you're going
to have zero dollars in your account. You didn't put away that one coin, now you have
nothing. If you do follow the first concept, here's what's going to happen... If you have
a salary of $3000 dollars, the one coin is $300, so in thirty years, you're going to
have over $100,000 in your bank account. Now here's what happens when you realize that
your money can generate you profit... And the biggest problem in realizing this is the
interest rate. You look at the 7% and you think of $300... What's 7% of $300? Oh, not
even $30. And it's like, it's not even worth it, but here's where the compounding effect
comes into play. So with 7% interest, you would have over $300,000 instead of $100,000.
That's three times the amount. With 10% interest, notice only three percentage point change,
you will have over $600,000. That's six times as much. So again, two basic concepts... The
first one: for every ten coins that you earn, pay yourself one coin first, then spend the
nine. That allows you to start accumulating wealth. And once you're doing that, realize
that you don't just let it sit. It's like the house, you rent it out. You do the same
thing with your money. And you also realize that the percentages of interest rates that
seem minimal are actually huge in the long term because of the compounding effect.