The material puts a spotlight on personal financial management as the route to achieving wealth. It argues that to get rich one must, if not reduce expenses, at least keep them under 90% of after-tax income. That figure seems sustainable and not much above the “pay yourself first” paradigm that used to be common. Excessive budgeting is condemned, and instead, we are encouraged to focus on eliminating “wasteful” spending (whatever that is) and finding ways to earn more, with home-based businesses and investments being the ideal outlets.
Key points include:
1. Controlling your spending is the key to building wealth, the author of this section asserts. If you fail to control your spending, you will not achieve financial success, plain and simple.
2. Setting Monetary Objectives: Gaining an understanding of your living costs relative to national figures can shed light on excessive spending. The author nudges us to evaluate our necessary expenditures—what it takes to keep our lives going—excluding any kind of fun money.
3. Budgeting Philosophy: The author expresses disdain for traditional budgeting, advocating instead for a budget that reflects current needs rather than restrictions.
4. Building a Cash Reserve: We recommend establishing a cash reserve that is equal to six months of living expenses. This reserve should be created using any income that remains after paying essential expenses.
5. CDs: This means using certificates of deposit (CDs) to keep cash safe. But don’t count on them to make you rich. They pay low interest, and inflation is eating into your returns.
In sum, the message is obvious: financial independence is achievable, but it takes discipline and smart decisions to get there. The essential elements are clear: spend less than you earn; earn more through smart, strategic means; and invest in income-producing assets instead of liabilities.
