In lesson two, George Clason describes the second skill necessary to build a firm foundation to become the wealthiest person possible. The first is to “pay yourselves first,” and the second involves “controlling your expenses,” In other words, learn how to live below your means. 1 2
Advice on Spending the 90%
After paying ourselves the first 10% of our earnings, we live on the other 90%. We must now make the best use of our money possible, which means we must control the money we spend on everything else. Clason gives us some advice as it relates to spending the 90%.
Needs vs. Wants
We have to define the difference between “needs” and “wants.” If we are not careful, what we all call necessary expenses will always grow to equal incomes unless we clearly understand this concept. The key is to study your lifestyle and reduce costs or eliminate them if possible. We should reduce our expenses to a level of needs only and live only on the 90% and do not touch not the 10%.
Make a Budget
Make a budget and write down all of your expenses. Dave Ramsey says, “A budget lets you decide what is worth spending your money on.” If you want to “fatten your purse,” you must establish a budget.
Budgets Show Where Your Money is Going
A budget will help you take control of your money by identifying how you have spent money in the past and keeping your money from going where you don’t want it to go in the future. Your budget will help tell you exactly where the money goes, enable you to pay your necessary expenses, and pay for wants without exceeding 90%, leaving 10% to grow your wealth.
Learning to Earn More Money is Our Best Offense
Our best offense, to use a football analogy, is our ability to earn money. Growing our wealth by using a budget to control our spending is the defense we have in building our wealth.
A Budget Will Help Identify Misspending
Budgets will help you identify the leaks in your purse. Manage your expenses to have money to pay for your necessary expenses, to pay for wants without exceeding 90%, leaving the 10% to grow.
Lesson 3 Teaches How to Make Your Money Grow
In Lesson 3, “Make Thy Gold Multiply,” Clason discusses building our 10% by the magic of compound interest and sound investing principles.
LifeCrafter – Money $ense