Why are you blogging about this?
Today, I got caught up in a post over at Getting Rich Slowly. The question is, if personal finance is so easy, why isn’t everybody rich? Before launching into my own arguments, I should help you get this website in context. J. D. Roth started the site after reading many personal finance books. From what I have read thus far, the posts on this blog tend to be practical tips and tricks one can use in everyday life to save a little money, grow a little money, and spend less money. Getting Rich Slowly has plenty of useful posts that most of us can use. I just have to chime in.
How to Get Rich
Getting rich is a simple function. C = A - B. So long as A, your income, is consistently greater than B, your expenses, you’ll have some money, C, left over. So, why has J. D. been posting for over a year? As best I can tell, the formula is not natural for human beings. We always want more than what our incomes can afford. We are not mathematical creatures. This means we have to try all kinds of tricks and techniques to get ourselves financially secure. We must constantly struggle with our own inclinations. Getting Rich Slowly focuses on the things we can do to maintain A bigger than B.
So getting rich is easy, right?
No. Though it’s a simple formula, there is much discussion about how to make C positive. Some focus on increasing your income. Some focus on reducing your spending. For some people, having a negative C temporarily is acceptible. For others, having a negative C never acceptable. For such a simple equation, there certainly is a lot of discussion. There are even experts who develop all kinds of complex mathematical formulas to help you make A - B = a positive C. Then, the discussion becomes how to make C as big as possible. How many of us think this way? It’s not natural.
What it takes to get rich.
It takes conscious effort to figure out how to make the simple equation work. Neither increasing your income, nor reducing your spending is easy for the majority of us. To carry out one or the other, or both for that matter, takes work and discipline. You have to have a goal and make small steps towards that goal every day. We have not strayed from A - B = C at all. Except that we say what C will be and figure out how to reduce B or increase A in such a way as to get C. It doesn’t matter how you get C; what matters is that you consistently have leftover money. That’s how you get rich.
So you get rich by saving money?
No. If you learn how to consistently keep more money than you spend, then you have learned what you need. Once you have enough savings, you can proceed to take that money to invest to become rich. If you have not learned fiscal responsibility and discipline, you’ll blow your savings. Without learning fiscal discipline, any business you start or investment you make will go under. Some people can outearn their financial foolishness temporarily, but in the long-term, it catches up with them. Your savings won’t make you rich, the discipline you develop from consistently saving will make you rich. If you value the hard work it took to save the money, if you learn to value money, you have a good chance of succeeding in your endeavors as you will take extra precautions to ensure the safety of your investment.
So what’s the first step?
If you are truly interested in getting ahead, you can do one thing and one thing only. Make sure you have money left over at the end of your paycheck. Save money, spend less, earn more, whatever; just keep as much of your money as you can manage. If you have the discipline to not owe money and have a lot of money saved, you have the financial skills to get ahead. You don’t have to start off a financial expert; you’ll learn along the way. So, the first step is to do something, anything, to consistently keep more than you spend. Make it happen.
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