Let’s Win In 2020: Take Control Of Your Money And Build Wealth

Let's Win In 2020Let’s Win in 2020.  I strongly believe that anyone who works their ass off and applies themselves can get ahead in this country.  We all have different barriers that affect us, but we have the strength and ability to break through those barriers if we want it bad enough.  Remember that the enemy of great is good, don’t settle for “just getting by.”.

In 2020 don’t participate in echo chamber “whoa is me” conversations.  Your thought processes need to be aligned with winning, not losing. It kills me to constantly hear whining and excuses from people, especially in my age group about how the system is rigged against us.  So what if it is?  All that means is you need to work harder, not that you need to give up.  Focus on what you can control.  Set yourself up to win in 2020 by taking the steps listed below.

How To Win in 2020 Step 1: Resolve Your Why:

I focus a lot on the “how” of improving my finances and don’t talk about the “why” enough.  Let me tell you something, Focusing on your WHY and thinking about your WHY every day is what makes the HOW possible.

Ask yourself: “Why do I want to improve my finances and win with money?”

  • I don’t want my heart to race when I open a bill.
  • I don’t want to feel like my world is falling apart because I don’t have $400 for an unexpected expense.
  • I want to have nicer things without guilt, whether that’s a nicer car, new clothes, or turning up the heat 5 degrees.
  • I want to be the first person in my family to be debt free.
  • I want my children to have more opportunities than me.
  • I want to ultimately retire with dignity.  
  • I want to retire early.
  • I want to be a blessing and not a burden to my children and grandchildren.
  • I want to give thousands of dollars a year to causes that are important to me.
  • I want to change the course of my family tree.
  • I want to ensure my children and grandchildren never live in poverty.
  • I want to quit my soul sucking job and start my own business.
  • I don’t want to depend on anyone else, including the government.
  • I want to inspire others to take control and win.

Identify your WHY and reinforce it every day.  Reinforce it when you take on extra hours or a side job.  Reinforce it when you drive your hoopty for another year and when you cut your cable package.  Tell yourself this is a small, temporary price to pay to fulfill your WHY. Knowing your WHY and believing in it is key the key to win in 2020.

Step 2: Make A Plan To Win In 2020:

Make a plan centered on the items that move the needle the most.

  1. Increase your income: Your income is your greatest wealth building tool.  If you are currently working 40 hours a week and work an extra 10 hours each week, even without overtime pay at $12 an hour that’s an extra $6,240 a year. An extra $6,000 a year if you choose to save and invest it will absolutely change your life. If you are like the average American, than your savings rate is around 5% of your income.  In the above example if your yearly income is $25,000 a year ($12 an hour X 40 hours a week X 52 weeks a year), then you are saving around $1,250 a year at 5%.  This one change, working 10 extra hours a week, with overtime pay not factored in would increase your savings rate by 480%! Going from $1,250 to $7,250 a year.Have a conversation with your boss about what you can do to become more valuable to the company.  Do it and then some.  Getting a raise is the easiest way to increase your income.  I’m personally not that great at these negotiations, but I’ve had a 5 minute conversation yield me a $3 an hour raise, that works out to another $6K a year.  Start a side hustle.  There are thousands of small business ideas you can start with little to no money. If you want to get ahead working 40 hours a week is not enough.  The math doesn’t work.  We all have 168 hours a week, make the most of it!  If you can’t get ahead the absolute first thing to do is work more hours to supercharge your income.  Don’t complain about always being broke if you aren’t willing to work more than a quarter of your week.
  2. Focus on housing and vehicle expenses: Housing is generally the number 1 expense in the average American budget, followed closely by vehicles.  Examine moving down in house.  Move to a less expensive area.  If you can’t (or won’t) move, consider getting a room mate.  I have a friend who rented out 2 rooms in his 3 bedroom house and gained more in rent that the cost of his mortgage. He took his housing expense from 20% of his income to -3.5% of his income. (Earning $35K a year he had a house payment of around $600 and rented out 2 rooms at $350 each, for a net income of $100 a month, $1,200 a year from his house.) For vehicles, if what you are driving has a car payment, do whatever you can to get out of it.  Sell the car and drive a $1,000 beater.  Upgrade each year with cash.  Typically after driving a $1,000 dollar car for a year you can still sell it for around $1,000.  Pay yourself a car payment of $100 a month into a separate savings account and next year upgrade to a $2,200 car.  Then the next year a $3,400 car and so forth. A $500 a month car payment will kill your ability to build wealth.
  3. Make a written budget for every month:  Each month challenge yourself to increase your savings rate by increasing income, reducing expenses, and selling anything that isn’t nailed down. It’s so much easier to get ahead with money when you know where your money is actually going. Challenge every expense starting at the highest ones and working down the list.
  4. Follow the Dave Ramsey Baby Steps: 1. Save $1,000 in cash, 2. Pay off all debt smallest to largest with intensity. (run a free credit report to get a list of any debts that may be in collections).  3. Increase your emergency fund to 3 to 6 months of expenses.  4. Save 15% of your income towards retirement.  5.  Save for kids college. 6. Pay off your house early.  7. Build wealth and give. This system gives you a WIN frequently and a series of wins is what we need to stay motivated.  First $1K in the bank = WIN.  Pay off first debt = WIN.  Pay of 2nd debt = WIN.  Repeat.
  5. Quit destructive habits:  Smoking a pack of cigarettes in Michigan a day costs $8.05.  Across 365 days is $3,000. $3,000 invested in a total stock market index fund earning 8% annualized returns over 35 years will be over a HALF MILLION DOLLARS.  Same with Lotto tickets.  The bank repo house I just bought had hundreds of thousands of dollars of lotto ticket receipts in the basement. Drinking a 6 pack of beer a night is another budget killer.
  6. Take the Mike Rowe SWEAT pledge:  Following these principles will lead to you building wealth, building friendships, and inspiring others.
  7. Set written long term goals that are aligned with building wealth:  “I plan to hit $100,000 in retirement savings by 2026 by investing 15% of my income and increasing my income by 20% through working more hours.”  “I plan to save up a down payment for a house and buy my first home by January of 2022.” When setting goals they need to be realistic, they need to have a definite time line, and they need to include action steps of HOW to get there.  We tend to over estimate what we can do in 1 year and greatly underestimate what we can do in 10 years.
  8. Protect Yourself: Make sure your insurance is in place.  Get a term life insurance policy to protect your children.  Keep insurance on your car and don’t drive without a license.  These actions protect you from falling backwards. I highly recommend Ladderlife.com for life insurance.  I just got a $2 million 10 year policy for only $40 a month with no medical check needed. A 10 year $250,000 policy can cost under $15 a month.
  9. Learn, learn, learn: Read about money. watch videos about money.  Learn constantly. From a motivation standpoint I love Chris Hogan’s recent book Everyday Millionaires: How Ordinary People Built Extraordinary Wealth―and How You Can Too That covers the results of studying 10,000 different people with a net worth of over $1 million. This book proves that ANYONE can build wealth.

Step 3: EXECUTE:

Every single day examine your WHY.  Every single day fight to increase your income and reduce your expenses.  Ask yourself “What can I do to move forward today?”. Start each morning with a to do list of action items that will move you forward.  Take unreasonable, maximum action every single day.

Step 4: Build A Team That Supports You:

If your “friends” want to encourage you to participate in destructive behavior they are not your friends.  If they want you to work less and stop your hustle they are not your friends.  If they put you down for wanting more out of life it is time to move on.  Your team should be people who are also DRIVEN to be successful towards their own WHY and want to celebrate your successes with you. You become like the people you hang around.  If you hang around with a bunch of bums your life trajectory will be very different than if you hang around with a bunch of highly motivated people.

Step 5: Teach Your Kids:

Talk to your kids about why you are working extra hours, about WHY you are cutting expenses, etc.  Keep them in the loop. This explains to them why change is happening and teaches them to look at long term big picture goals.  Talk to your kids about the HOW and what you are doing to reach those goals.  Not only does this give them the nuts and bolts of a financial education it also shows them that you are choosing to be in control of your destiny and that they can do the same.

Let 2020 be the year you take control and move the needle on your finances.  Let 2020 be the year you change your family tree and build your legacy.  Let’s win in 2020.

 

John C. started Action Economics in 2013 as a way to gain more knowledge on personal financial planning and to share that knowledge with others. Action Economics focuses on paying off the house, reducing taxes, and building wealth. John uses the free tool Personal Capital to track his net worth and posts quarterly updates on his finances. Check out the Action Economics archives section for all past posts.

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