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If you choose to build any amount of wealth through the Savings Path (See 4 Paths to Wealth), your net pay as an employee, or after-tax profit as a business owner, must exceed your cost of living. If your cost of living equals or exceeds your net pay or after-tax income, you won’t be able to save.
The key to saving is to either:
- Fix, or lock in your cost of living or
- Increase your net pay or after-tax profit
How do you lock in your cost of living?
- “Same house, same spouse, same car” is all about locking in your cost of living.
- “Frugal Lifestyle” is another way to manage your cost of living. I’ve written extensively about his (See Smart Money Habits)
How to increase your net pay or after-tax profit?
The answer to this question has too many moving parts to adequately answer. But, I will tell you this, investing in yourself by getting better at what you do is an absolute requirement.
If what you do for a living is knowledge-based, then you must increase your knowledge, on a daily basis, in whatever field you’re in. If what you do for a living is skill-based, then you must improve and perfect your skills, on a daily basis, in whatever field you’re in.
When you get better at what you do, eventually your net pay or after-tax profit will increase.
Tom Corley is an accountant, financial planner and author of “Rich Kids: How to Raise Our Children to Be Happy and Successful in Life”, Effort-Less Wealth, Change Your Habits Change Your Life, Rich Habits Poor Habits and “Rich Habits: The Daily Success Habits of Wealthy Individuals.”
