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What most people do when they earn a dollar is pay everyone else first. They pay the landlord, the credit card company, the telephone company, the government, and on and on. The reason they think they need a budget is to help them figure out how much to pay everyone else so at the end of the month-or the year, or their working life-they will have something "left over" to pay themselves.
This, my friend, is absolutely, positively financially backwards. And because this system does not work, people wind up trying some pretty strange ways to get rich.
When you boil it down, there are basically six routes to wealth in this country. You can
- Win it
- Marry it
- Inherit it
- Sue for it
- Budget for it OR
- Pay Yourself First.
Let's quickly review each of these methods.
Win It: Can you guess the No. 1 way average hard-working people try to get rich in this country? They play the lottery. People in this country spend more than $8 billion a year on lottery tickets. That's more than $250 for every person, including those not old enough to buy a ticket. Can you imagine if these same dollars had been invested in retirement accounts? Now let me ask you something else. Have you ever won the lottery? Do you know anyone who has? Did that person share any of their winnings with you? Exactly. So let this one go.
Marry It: How's this working for you so far? There's a saying that it's as easy to marry a rich person as a poor one. Really? The truth is that people who marry for money generally end up paying for it for the rest of their lives. So let's skip this one too-unless, of course, you really do fall in love with someone who happens to have money.
Inherit it: This obviously isn't worth thinking about unless your parents are rich. And even if they are, isn't there something a little sick about visiting them during the holidays, asking how they are, and then thinking "bummer" when they say, "I feel great"?
Sue for it: This one is big in the United States, where more than three-quarters of the world's lawyers practice and upwards of 94 percent of the world's lawsuits are filed. But Canadians are becoming more litigious too. While Canadians have usually left it to the Americans to sue each other for spilling coffee in their laps or abandoning the wheel of an RV on cruise control, some Canadians feel that, rather than earn, save, and invest, a better strategy is find 'em. sue 'em, and sock it to 'em. In any case, it's not a real system that can be counted on to build wealth.
Budget for it: You can scrimp, brown bag it, clip coupons, track every penny you
spend, never have fun, and put off living for thirty years in the hopeful expectation that someday you'll be able to retire and start enjoying your life. Yuck. That sounds terrible. No wonder this rarely works.
This leaves us with the one proven, easy way to get rich. And that is...
PAY YOURSELF FIRST
Pay Yourself First means just what it says. When you earn a dollar, the first person you pay is you. Most people don't do this. When most people earn a dollar, the first person they pay is the government. They earn a dollar and, before it even makes it onto their paycheque, Canadians pay the government something like 30 cents and Americans pay somewhere around 18 cents in federal income taxes (often more). On top of that, for Canadians there's the Canada Pension Plan, provincial health insurance and employment insurance. In the end, they wind up paying the government first as much as 35 or 40 cents of their hard-earned dollar. Seems like everyone is getting paid but the person who earned the paycheque.
The Secret is the Way Your Money Flows
You have a right to legally avoid federal and provincial taxes on the money you earn. The key word is "legally." You can legally Pay Yourself First, instead of the government, simply by using what is called a registered retirement savings plan (RRSP) for Canadians or a 401(k) plan for Americans. You can hold a large number of investments in an RRSP or 401(k).
Who You Work for is Waiting for You at Home
As much as our employers would like us to believe otherwise, the reason most of us go to work each morning isn't the company mission statement or even serving the customer. It's ultimately about us. When it comes down to it, the reason most of us go to work is for the sake of ourselves and our families. We go to work to protect those we love. Everything else is secondary. We are our first priority.
Or are we? The truth is that we are not raised to put ourselves first. We are raised to be nice. We are raised to share. We are raised to help others.
These are wonderful values, and I believe in them. But there's something else I also believe: the old saying that the Lord helps those who help themselves. I think there is timeless truth in this. So before you start laying out a financial plan, really focus on these questions: Are we helping ourselves? Are you helping yourself? Are you REALLY working for yourself? I'm not asking if you're self-employed. I'm asking whether you're really working for your own benefit and that of your family when you go to your job each morning.
About the Author
Visit InvestorGazette.com today for articles about retirement income planning for the individual investor. The Investor Gazette - weekly edition of investment properties and investment opportunities.
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Federal government to cut air pollution monitoring teamMontreal GazetteOTTAWA — The federal government plans to break up a team of Environment Canada smokestack specialists that played a key role working with enforcement officers and industry to crack down on toxic pollution, a Postmedia News investigation has revealed.and more » |
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