Are you stealing from yourself?
Tuesday, 18 September 2012 12:01


Becoming financially free is simple but not easy. Why? Because it requires focus, discipline, and commitment. Many people rob themselves of their tomorrows because they are so greedy for today. This blog is offering some tough love because this week, I had two different people, very near and dear to me who expected my blessing when they justified breaking one of the fundamental laws of financial freedom.

Financial freedom is truly easy because all you need to do is save 10% of what you make. Not sometimes, or when you feel like it, or if things were different, but always! This is called paying yourself first. With this 10% you save it and NEVER use it, except for investment purposes. In other words, it is what you use to make more money with. In this way you create a golden goose that will provide an income to you without you having to physically work for it.

If you simply save $7.00 a day (at 8% interest) when you are twenty, thanks to the power of compound interest, you will have almost 1,000,000 when you are 65. For more examples of compound interest and to motivate you to start saving consistently today if you haven’t already, check out Chapter Ten (Pay Yourself First) in Financial Fitness for Beginners.

Oh, but if it is truly that easy, why isn’t everyone a millionaire at 65? The catch is that only you can do it for yourself – just like getting in shape – you have to be the one to diet or exercise (or both). You can’t do it once in a while, when you are in the mood or if the stars are lined up exactly right. There is no doubt about it, saving money on a regular and consistent basis requires discipline. You can make it easier on yourself by having this 10% automatically deposited to an investment account, so you are not as tempted to spend it first.

That brings us to the second challenge. Temptation. Once you have some money saved up, it becomes very tempting to use this money for things other than its intended purpose of becoming your golden goose. It is easy for you to justify why you should take it out and spend it on something other than an investment. It is for something very important. It can’t wait. It makes more sense to spend the money now, rather than a few months down the road. Then just to convince yourself that your decision to use the money is in fact the right one, you put the icing on the cake. “I am just borrowing it. I will put it back in”. That’s a good one! If you do, you’ll be one in a million who actually does it. (Oh yes, I forgot…you actually really, really mean it).

If you are tempted to steal from yourself, ask yourself this question first. Have you already stolen money from your financial freedom account in the past and not paid it back to yourself? Hmmmmm…..and you are thinking of doing it again...but this time it will be different, right? By repeating your bad habits, the one difference is that each time you justify “borrowing” your money, know that the day will come when that option won’t be left to you because you have stolen it all and your “plan” to pay it back somehow never seemed to happen. All you need to do to confirm this vicious cycle is to look around and see how many 65 year olds do not have $1,000,000 in their bank account. It has nothing to do with not making enough money. For many it is a lack of financial education and understanding. Once you have this knowledge (which again is as easy as reading Financial Fitness Books), any failure to achieve financial freedom is the result of not having enough discipline. Harsh, but true.

You need to live your life on the remaining 90% of your income. From this, you save for purchases that you want to make. Your financial fitness account is not an ATM. If you are impatient for something that you want to buy or have, instead of taking the easy way and hacking away at your golden goose, consider other options. Work for it! Reduce your spending in other areas. In other words earn the money you want. This may require waiting for it, but in the long run your discipline to forego immediate gratification will develop strong financial fitness muscles that will keep you strong enough to avoid the temptation of stealing from yourself today or in the future.

Until next week.....

"Sometimes the best helping hand you can get is a good, firm push."

-- Joann Thomas