Step 3: The Magic of 10%

It is not enough to have a good income coming in from your daily industry — your job or your business. You have to be cash ready in life. You have to avoid the doubling of troubles by, having an emergency, not having the cash to deal with it, and therefore being forced to borrow — with interest. If you have the cash, you can pay for the emergency and be done with it. Nice.

If you want to own stocks, you have to have cash in order to buy some. No one is giving stock away for free. Most dramatically, if you want to own real estate, starting with a place to live that you own, you are going to need money for an initial downpayment. Trust me, you can get that downpayment and a lot more. And it all starts with savings; do not let anyone tell you differently.

If you are going to get into the money game, once you get some money coming in, you have to become a saver and there is no two ways about it. So, how do you do this?

Start With Whatever You Can Handle

You have to start somewhere. If saving 10% is too much, then start with a percentage of your monthly income that you can handle. Work up to 10%. In my case, when I first began, my bills were so high, I was able to save only 1% of my gross income. Now you may say, “How can I get wealthy on 1% of my gross income?”

When I first began the long and awesome journey to figuring out the path of riches, I had a big stressful job, a long commute, and piles of bills. I was making good money, yet barely had enough to pay my bills. But, after reading The Richest Man in Babylon, I decided that my focus would be to save 1% of my gross income. In the first year of saving 1% every month, I had several hundred dollars saved by the Holidays. It did not look like much to me at the time.

However, it turned out to be exactly enough for a roundtrip plane ticket home and presents for all the kids in the family. I had absolutely the best Holidays ever that year. Every present was paid for with cash!

On the plane trip home, I met an elderly man on the plane and we got to chatting. He talked about his work. I eventually realized from the topics of his conversation that he had to be a millionaire — he was what I call a silver fox. Foxes are clever and silver hair means some years have passed. I wanted to tell him of my little achievement, but I was afraid he might think that I was a small potato. But I was excited, we were going to be sitting together for a few hours, and I couldn’t contain my glee.

So I told him about my 1% goal leading to exactly enough to pay cash for presents for everybody. To my surprise, he was very interested, gave me the phone number of his banker, and started giving me real estate tips. So, what I learned is that a silver fox loves a small potato! An older wealthy person loves to see a younger person figure money out on their own. It all starts, for everyone, with this principle of saving 10% — even if you just begin with 1% –because there is no shame in starting small!

I chuckled in January when I got my credit card statement. I still had big balances from past indiscretions, but the amount owed was no higher because of a trip and a pile of presents. I paid for the Holidays, free and clear. And a funny thing happened in January. I became determined to start saving 2% of my gross income each month. Because here is the real value of this rule – it sets you up in the habit of saving money. Since I already had the habit of saving 1% per month, it became a matter of habit to begin saving 2% gross income per month. Eventually, I did the hit the goal of saving 10% of any money I earned. And, my personality began to change, for the better, in ways I never imagined.

Picky, Picky!

Once you have made the decision to start saving up to 10% of your gross pay, things start to change. In order to save, you automatically have to spend less. This means that you have to buy fewer things. Hence, you become pickier about what you buy. This is a good thing! When I was poor, and I would see a rich person being very careful in their dealings, I would think, “You have so much money, why do you haggle? – it’s degrading.” Wrong. Rich people are careful with a dollar. It is why they are rich.

Rich people are careful with a dollar. It is why they are rich.
-mS. KATHERINE

Following this program makes you a stronger person. It teaches you how to say no to yourself, and to others who are trying to make you spend your money. When the sales person is in front of you and wants you to buy, there is a tendency to give into that pressure. By working toward the 10% savings rule, you develop a mindset that shields you from the expectations of others. Your internal savings rule is a focus that helps you withstand outside pressure. It helps you concentrate on what is best for you.

Don’t be in such a hurry to give away your money. I have a rule, if something costs money, I WAIT for seven days before committing. Terms usually increase in your favor when you make the other side wait; they sweeten the deal. Sometimes I decide I do not need that item after all. I keep the money instead and wait for something better to come along. It usually does.

So the next issue becomes how do you keep this savings safe from temptation so that you can get a good build up so that you can start to invest? Read next article for useful tips that can help you stay on track in saving 10% of what you make.

And do not forget; read “The Richest Man in Babylon” under Recommended Reading below. This book changed my whole life. I read this book, the world stopped, I changed, and nothing else was ever the same. This book made it all happen. Get serious. Do it right now.