Believe it or not, the wealthiest people in the world didn’t start from wealthy backgrounds. Many started from poor, deprived backgrounds with very little money in their pockets.
Warren Buffett is an example of this. He openly admits that his wealth was rapidly accumulated in his 50s, and it took years of investing diligently before it paid off to these extremes of income. This piece by Grant Cardone illustrates it beautifully.
Oprah also came from an impoverished background. She was told she’d never be on TV, and look where she is now? Again, it was an “overnight” success, it took years to come to fruition and a drive to succeed.
The thing that links these two is that they had a future vision, and they kept taking steps to get there, even when they weren’t exactly sure how it was going to be possible.
In Warren Buffett’s case, he realised that he would need to have a proportion of his income saved and invested. He knew that spending every last penny would not serve him in the long run.
With Oprah, it was to be focused on the life that she wanted to lead and to do something every day to get her there, even if it was something really small.
Small impacts over a long time lead to BIG results! And believe it or not, it’s not down to how much money you make!
Well it’s ok for them, they’re famous!
Now this is not just a celebrity thing. There are so many examples of people who saved and invested diligently all their lives. The difference is you just don’t know about them. Read the millionaire next door* if you don’t believe me.
And if you want some U.K. examples, there are several articles now all talking about the rising baby-boomer millionaire rates. And these are ordinary people who saved and invested throughout their lives. Yes, granted they are a generation exposed to a number of very favourable conditions (rising property prices/final salary pensions to name but a few), but nonetheless, they weren’t always this well off – the accumulation took YEARS to show it’s impact.
I’m not implying that you need to aim to be a millionaire. But I am advocating for your future and to help you avoid a potential disaster of running out of money too soon into your retirement.
I’m also not going to pretend it’s easy. If you earn more money, you can reach your goals faster. If you earn less and you have kids, then obviously your progress is much slower. It’s still not an excuse not to save something each month though. Small actions lead to big changes over time.
Yes of course! But you have to want it, and you have to educate yourself. Read books, go on courses and attend events. The knowledge builds up gradually and with each step you’re getting closer to your goals.
Do something each and every day that will get you there. Even if that one thing is saving change into a money box. It’s literally a small change which will make a big difference with consistent action. You then need to be wise enough to use the money for a purpose like building an emergency fund that will support you for years to come.
The 80/20 rule
You could also try applying the 80/20 principle.
80/20 comes up a lot in nature and in our lives in general. It appears to have been first noted by Vilfredo Pareto in 1896 and is conveniently called the Pareto Principle.
In this principle, the idea is that 20% of something generates 80% of your results.
It’s pretty handy – for example, in my own life:
80% of my daily clothing choices come from 20% of our wardrobe options
80% of the clinical work I deal with on a day to day basis comes from 20% of the patients I see
I work 80% of the year to enjoy 20% of the year when I don’t work
I’m sure you can find plenty of examples in your own life.
The reason why you don’t have to be wealthy to start with is because if you follow the 80/20 rule, you can become wealthy too- but it needs time to work, just like Oprah and Warren.
80/20 applied to my finances
So how does the 80/20 rule work for me?
80% of my results
To start with, 80% of my results so far in sorting out my money have come from 20% of the principles I have learnt over the past few years. There is a tsunami of strategies, advice, blogs, courses, podcasts, mentors, but in the end, it came down to just a few key principles that THEY ALL FOLLOW:
Don’t add more bad debt to the pile and pay it off consistently
80% of my fintech
Over the years I have downloaded lots of budgeting apps and other fintech products to test them out, but I’ve ditched most of them (80% perhaps?) and only use a few now. And these are the only ones I share on my blog and in my Facebook community.
It means that my attention isn’t scattered and I can focus on what is important – managing my money and helping others to manage theirs.
My 80/20 budget
I also apply this basic budgeting rule to my money:
I spend 80% of my money on bills/going out/education etc (which means I can still have fun)
I put 20% of my income towards improving my net worth (create an emergency fund, invest and pay off bad-debt)
Is it perfect every month? – no, but I certainly try my best. I know that if I consistently do this month on month, that 20% of income will go on to produce further long-term benefits like:
having better financial security (through an emergency fund),
being able to buy into further investments with greater returns (stocks and shares/property etc),
becoming debt-free, and
leaving a lasting legacy for my family (by passing on good money habits, education and financial resources)
20% of my income for more than 80% long-term impact (if I can even quantify it like this!)? You bet I’ll keep doing it!!
Obviously it’s not the complete story, because of course I have also had to LEARN how to invest, and you’ll need to go away and do this too, but at least you’ll have the money freed up to do something with, even if that is to employ an independent financial adviser to help you.
And that’s literally it. For big long-term results, you need to apply small changes to your daily and monthly habits. It’s not about winning the lottery or coming into a huge inheritance, having a “big-break” or falling into the right career from day 1.
It’s able putting one foot in front of the other and making small tweaks to your money and your habits EVERY SINGLE DAY.
>> Perhaps you can start saving for your first emergency fund?
>> Perhaps you can go through your bills and ditch some expenses
>> Perhaps you need to learn or do something new to go up the pay-scale at work?
>> Perhaps you can find yourself a kick-ass mentor to help you on your way…..(!)
We all need to pay attention to our finances. There’s not a single person who is responsible for it other than you, EVEN IF you employ a financial adviser to help you. Ultimately it is your responsibility and you need to know what’s going on.
If you’re not already saving and investing a proportion of your income, then you need to start today. Spend a proportion of your time learning how to make it happen, and leverage other people who have gone before you to make it happen faster!!
Do whatever it takes, you’ll thank yourself for it in many years to come.