The “B” Word

First and foremost, people who seem to have more money than others live by a written budget. Rich people know exactly the percentage of net income spent on living expenses, charitable contributions, investments, and side hustles. This is based on George S. Clason’s book The Richest Man in Babylon.

Jim Rohn commented that some people complain. Poor people say if they had more money, then they’d budget better. Jim Rohn always said that if they budgeted better, then they’d have more money. He called it a money plan.

So living on 70% of net income is the goal. The more a person earns, the lower this percentage may be. But the typical American family should aim for about 70%. The big takeaway is this… Live on less than you earn regardless of your income!

Living expenses include: food, shelter and utilities, clothing, and transportation. These are referred to as the “four walls,” Because they are the areas nearly everyone must spend earnings in order to survive.

So you’re probably wondering what’s the remaining 30%? The breakdown of the remaining 30% – which often separates the rich from the poor – goes like this…

1. Charity – 10%

Rich people tend to be givers. Giving 10% of net income to groups and organizations in is noble. And charitable contributions are tax deductible.

Some people say if they had more they’d give more. I say if you give more, you’ll have more. So start small. It’s easier to begin by parting with 10¢ of a dollar than with $100,000 out of a million.

There’s something to helping others that the Spirit of the Universe tends to like. And it usually boomerangs!

An even more fun thing is giving an individual help for any reason. Ever left a $100 bill as a tip for a single mom expecting twins? It doesn’t just feel good; it’s living with style.

2. Savings – 10%

Ten percent goes to savings. First is the emergency fund in a money market account with check-writing privileges. Once there is 3 to 6 months in an emergency fund, start a tax-favored retirement account someplace like Vanguard.

Then spend from what’s left. People struggling with personal finances typically spend what they earn. Then if there’s anything leftover, they may save. Pay yourself first!

3. Side Hustles – 10%

People who are building wealth almost always have something going on the side. Working on your J.O.B. while having a potentially lucrative side income makes “working for the man” a hell of a lot more fun. And with some persistence, side hustles may even replace a regular job’s income.

So whether it’s the stock market, real estate rentals, an online business (you’re looking at one!), or even a yard work business… know that wealth-builders invest about 10% in side hustles.

The 30% that Makes the Difference

So what are your thoughts on this 30% that seems to make the difference in building wealth. The budget is the cornerstone that tells you what the 30% is that is available for wealth-building. Most of us are not going to get rich working for someone else.

But this money plan can show how a person’s income is their biggest wealth-building tool. It takes advantage of benevolence, compound interest, and business-building.

A Final Note on Consumer Debt…

Rich people do not borrow money to buy doodads. (That’s Robert Kiyosaki’s word from Rich Dad Poor Dad.)

Poor people ask how much down and how much a month?; rich people ask how much? - Dave Ramsey Click To Tweet

Doodads are anything that loses value: cars, boats, computers, furniture, etc. These are all examples of things that not only cost money to own but drop in value over time. No one would borrow money to invest in a company that they knew was going to tank AND would require ongoing cash infusions, would they?

Rich people either invest in something whose cash flow will pay for the doodad, or they save up and pay cash. Even if it’s a money dial item.

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