I put a piece of paper up on the big corkboard the other day. First, I have a big corkboard. When I first moved into my place I had a tiny little desk that just wasn’t cutting it. As those of you who have read Getting Things Done will know, having a functional workspace is essential. David Allen suggests the most basic idea is to take the door off your office and put it on a couple of saw horses. Add a couple of baskets (or whatever you use for GTD’s collection phase) and away you go. I basically did that. My landlord had a 3-4′ long piece of countertop, I made a couple of sawhorses, an now I have a workspace. I also have a cubicle divider panel which I’ve put behind my desk and serves as a large bulletin board. Anyways, I’ve also re-read The Wealthy Barber, Why We Want You to Be Rich, and Rich Dad Poor Dad over the last month. (I’ve also done some spiritual reading, which is always a good idea when you’re reading about money, but that’s another post) Combined with being officially under-employed right now, they’ve motivated me to make some hard-er and fast-er rules about my personal finances and my financial goals. Here’s the 4 that are up on the wall right now, and I’ll take a picture of it later.
- Pay me first => 10% Rule
- Tithe 10%
- If it goes on VISA it has to come off within 48 hours.
- 20% of $ from asset column profits can be mad money.
Now that’s definitely not an exhaustive list of my monetary guidelines, but it’s a start. I’ll explain. First, the 10% rule is the Wealthy Barber rule. It’s the 10% savings rule, and both Barber and Rich Dad are big advocates of the "pay yourself first" rule. The second rule is just a good idea. Most of the rich people I know or have read about are subscribers to the ‘give to receive’ school. As a Catholic Christian being charitable is important, both in terms of time and money. It’s one of those things that you pay first and then you don’t miss it, just like the first rule. I don’t just give to my church, but to all sorts of charitable things. Also, tax receipts aren’t a requirement. I’m giving to give, not to get a tax break. Third, the VISA rule. If you want to get ahead in terms of personal finances, you’ve got to dump the high-interest debt. That means cutting up the credit cards. I kept one card and keep (a) making at least 150% of the minimum payments and (b) throwing all sorts of extra money at it. If you have a credit card with a balance, see how much you’ve paid in interest in the last year. Then go change your pants, because you may have wet yourself. Why didn’t I take the scissors to all of my credit cards? Because there are times when you need to: buy airline tickets, put a deposit down for something, buy something online, or are picking up dinner and need an easy way to pay (so you can pay attention to whoever you’re with, and not on playing with a PIN-pad). By using the 48-hour rule I stop going deeper into useless debt; I’m not going to put it on the plastic unless I know I can pay that charge off. I put the receipts on the wall behind my computer so its looking me in the face until I do. Fourth, Chris’ strange 20% rule. It’s not going to make a lot of sense unless you’ve read Rich Dad, but here is the why and then an explanation in a nutshell. I use the 20% rule because spending money without feeling guilty is awesome! I’ll explain with an example. If you win $10,000 in the lotto and go spend it you’ll feel guilty. You know you will. "I should put it into my RRSP/401k, or my kid’s RESP, or pay down my mortgage, or…." However, if you stick it into your asset column (as Rich Dad defines it), which could be investment in real estate, stocks, whatever, then you’ll feel good, but have no money to play with. When you get the income/cash flow/capital gain from that $10,000, then you can play with 20% of the income from that money, and reinvest the rest. It might not seem like much, but if you stick $10k into a half-decent vehicle and get 15% a year ($1500), then you get at least $300 to play with guilt free every year. If you’re getting more than a 15% return (as is possible in many other investments) then you get more mad money. I also think that $300 guilt-free is much better than spending $3000 of guilty-money that could be working for you. Am I on crack? Possibly, but it’s a start.