Most of the advice you read from people in the personal finance world, probably tells you to practice ultra-frugality if you want to be rich. But there are better ways of achieving this. Find out how spending like a wealthy person is actually the key to becoming rich.
A common man’s way of thinking is usually that he saves after meeting the necessary expenses. A wealthy person’s style is the other way around. As Warren Buffet says: “Do not save what is left after spending, but spend what is left after saving.” Some people call this the Millionaire’s Formula.
Though you may think this method leaves you with little money to spend on the things you enjoy, like eating out or buying designer shoes, it’s pretty much the opposite.
The secret of this formula is conscious spending, which means having a more efficient use of your income and focusing all the wasted money, toward what really makes you happy. People who practice it are able to afford what's important to them, without always being cash strapped.
Avoiding the mindless spending that can come from disorganized finances, helps you have more money to spend purposely on what you enjoy the most.
Setting up the system may seem hard but it comes down to:
1. Automating your finances.
2. Knowing where your money goes so you’re in complete control of the situation.
Humans have incredibly limited willpower, so this is a way of paying bills and putting money away in your savings account each month, without the need of going through difficult decisions. Automating your finances allows your system to work for you and passively do the right thing.
This is how it Works:
At the beginning of the month, when you receive your paycheck, the money is automatically sent to where it needs to go through the systems that you have already set up.
Spending recommendations can be:
•50% Fixed Costs (utilities, rent, insurance, and debt)
•10% Investments (including your Roth IRA and 401k plan)
•10% Savings: This is money that goes towards things like vacations, home down payments, and an emergency fund.
•30% Guilt-free Spending: Money you can spend on things you like!
Automating your finances makes saving easier and a lot more fun.