Today’s post is the last in a series about the profound impact the 10 Money Mastery Principles can have in your life, if you will but learn and apply them. As I mentioned in the first post in this series, Financial Principles: Lighthouses that Will Never Steer You Wrong, the principles I have shared in this series are eternal, unchangeable, and work no matter what your own personal financial circumstance are. Like lighthouses, the Money Mastery Principles provide a clear path to success that can be a guide no matter where you are in your quest to reach financial safety and prosperity.
Today’s principle, Principle 10, is a combination of applying each of the other nine:
Money in Motion Creates Additional Wealth. This principle is where wealth is truly built and accelerated (but only when the other nine principles are clearly understood and applied). If there is one single strategy that builds wealth and financial security the fastest, it is to understand the “leverage” factor of Principle 10 and how to get your money to do more than one thing at a time. The banks do it and so can you!
Principle 10 is amazing at creating additional wealth. But to be the most successful, Principle 10 needs to work in harmony with all nine of the other principles. The problem is if you are not well grounded in Principles 1 through 9, you won’t be able to keep much of the money you make in using Principle 10.
For example, if you do not track your income and expenses (Principle 2), you have no hope of knowing where you stand financially and therefore will continue to spend recklessly and borrow uncontrollably. If you don’t take time to know the rules (Principle 5), you could incur huge liabilities and even have legal expense. If you aren’t financially organized (Principle 8) like understanding how your assets are taxed, knowing where important documents are, or how your assets are titled, etc., you will lose money in ways you can’t even comprehend. It is so important to learn all the Principles, and implement them in the order prescribed.
Let’s use an example of baking a cake and see how a recipe helps you be successful. If you start with the right ingredients, but you mistakenly put in a cup of salt instead of sugar, how will the cake turn out? And what if you try to add the egg after the cake is baked? It’s the same with finances. You may know what the “ingredients” are for financial success (control spending, pay off debt, save for retirement, reduce taxes), but let’s say you don’t know what order to apply these things to your financial life. Or what if you concentrate too much on one area, like trying to pay down debt, for example, without learning how to get spending under control at the same time? The result won’t be any better than if you don’t follow the recipe for making a cake.
This little example illustrates the need to systematically manage your money using the right principles, in the right amount and in the correct order.
Here is an example of how one of my clients used the 10 Principles to make and save more money. I’ll call them Steve and Lori. First, they got their spending under control using a Spending Plan (Principles 1 and 2) so they could pay off all consumer debts (Principle 4) and save $500 a month (Principle 3). They stored up this money until they had three months worth for emergencies so they wouldn’t be stressed out over small financial emergencies. Then Steve and Lori saved and purchased a garden tiller to use for prepping soil. They rented this machine for two hours at a cost of $50 to friends and neighbors. They have now earned more than the $800 it cost them to buy the tiller and put $800 more into savings. Steve and Lori have loved this little venture and have purchased more equipment and rent it out on a regular basis, creating a small, but thriving home-based business (Principle 9). While the amount of money they make isn’t huge, it IS extra income that hardly costs them much time or effort to earn. Plus they can deduct expenses in their side business using Schedule C that help offset overall taxes in their regular W-2 employment. In addition, the equipment is used over and over to make additional money (putting their money in motion once to create additional money time and time again, Principle 10).
Now that they have learned the value of actually implementing Principle 10, they have the experience and know-how to see how they can implement this principle into even bigger ventures to make more money. They would not have understood the power of this principle without learning it personally on a small-scale as they did. Sometimes understanding how to create additional wealth with the money and resources you already have cannot happen until you implement the idea and see how it turns out. How many people do you know that don’t have any consumer debt and are creating an extra $400 income each month outside their day-job with a simple side-business based on leasing an existing piece of equipment over and over again?
Go to www.moneymastery.com and find out how to use a principled-based, time-tested system to predict when you will quickly be out of debt, have a strong retirement savings fund, and be able to create additional wealth without a ton of effort on your part.