2. Buy Quality
Quality lasts longer. You’re not only doing your wallet a favour, but you’re also doing the environment a favour. Replacing cheap items is expensive. Also, when you buy quality, make sure you purchase from a reputable store. That way, if you have any problems, you can get the item fixed or replaced.

3. Don’t spend more money than you bring in
It seems simple, and it’s probably become too much of a cliché for people to pay attention to it anymore, but then why are people using credit cards like crazy? Credit cards are a too easy way of spending more than you have. My rule is if I don’t have the cash, I don’t buy. I don’t care if I know that paycheque is arriving in two weeks. No cash in hand, no deal.

Now, here are some specific tips on how to spend less.

Sources: Huge Debts Paid Off Fast, The Best Financial Advice Ever, Savings Strategies

2. Business owners:
Of the top 10% richest people, 41% own their own business; however, business owners are still advised to diversify their investments to decrease risk.

3. Borrow strategically:
While the rich do have debt, the kind of debt they have is very different. They are much less likely to have credit card and installment loan (car loan) debt, and much more likely to have mortgage debt. While the rich can often afford to own property outright, they don’t, because mortgages have low interest rates, and they prefer to invest their money in high-interest ventures.

4. No fancy cars:
Although there are some rich people who own a lot of expensive cars, they are the exception to the rule. Rich people do spend more than the average person on a vehicle, but the expense is a smaller percentage of their overall net worth. The average person spends 8.8% of their net worth on a vehicle, while the rich spend on average 2.4% of their net worth on a vehicle.

5. Home & real estate owners:
Of the top 10% richest people, 95.8% own homes, and 40% own real estate like rental property.

6. Investment wealth:
The top 10% richest people have on, average, an investment portfolio consisting of 46% in stocks and bonds, managed accounts, IRAs, mutual funds, deposits and alternative investments; 10% in pensions and defined-contribution plans like 401(k)s; and 6% in insurance and annuities. However, in 2004 real estate was overpriced so investors were cutting back their investments in rental properties.

The lessons:

Next: What are the steps to becoming rich?

Source: Lessons the Rich Can Teach You

1. Earned Income
Earned income (also known as daywork) is money that is exchanged for your time. This includes working for someone else on a salary or for an hourly rate, and it also includes a business that cannot operate when you’re gone.

2. Residual Income
Residual income happens when you do something once and then you earn money repeatedly without more effort. For example, if you write a book or sold a song and earned royalties off of it, that money would be residual income. Other examples include, rental income, some network marketing programs

3. Leveraged Income
Leveraged income is when you earn money from the combination of yours and others’ work. For example, if you were an affiliate and signed up someone underneath you, you would earn money on both of your efforts. Leveraged income is powerful, because it pays you back multiple times through team efforts, rather than on your efforts alone (CarbonCopyPro).

4. Passive Income
Passive income is any money that is earned with no (or very little) effort. For example, investing, some affiliate marketing programs (ClickBank & Share-A-Sale), and some network marketing programs. Residual and passive income are closely related and sometimes identical but not always.

Next: Budgeting-How do I set up my expenses?

Create a virtual employer
The idea is to open account (which is called your virtual employer), and deposit all paycheques in this account. Automate transfers twice a month to another daily banking account and pay bills and spend money from this account. That way you are saving first and spending second. For more about this, check out the article Build Wealth with a Virtual Employer.
Good for you: If you require some creativity, mainly use your debit card for spending, and find it difficult to stick to budgets, you’ll like this plan.

Use an online envelope system
This concept for this idea is similar to the conventional envelope system, except money is virtually allocated into different spending envelopes. An example of this system is Mvelopes.com.
Good for you: If you prefer using your computer to track spending, are a visual learner, and prefer a system that is already set up, this method is great.

Use an online budgeting program
You enter your income and your planned expenses, and then you track your actual spending. An example of this system is Out of The Dark.
Good for you: If you prefer using your computer to track spending and a system that is already set up, and are comfortable with the relationship between numbers, you’ll like this method.

Use a spreadsheet
You can simply open any spreadsheet software such as Excel or Numbers and you enter your Income and subtract your expenses. Click here to see an example.
Good for you: If you are comfortable with using spreadsheets, and prefer using a computer and customizing your budget, this method is for you.

The important thing is to use something that is easy and convenient, so you won’t be burdened or frustrated with a system that you find difficult to use.

Next: Budgeting-What are different types of income?

All money that comes in (paycheque, gift money, ect.) is income, and all monies that you spend (rent, food, going out, ect.) are expenses. Instead of saving what’s leftover, make a plan, set money aside every time you receive money, and then stick to a plan for spending the remainder of the money. That plan is called your budget.

The great thing about creating a budget is that numbers don’t lie. For someone who has never done a budget, it’s often a wake-up call (I spend that much on eating out! @#*$). The focus of a budget is generally on expenses. You have to know where you’re spending your money, and where you need to spend less. Budgets can be dreary, so here are a few things that I do to keep myself motivated:

• Make savings goals, and create small rewards for when you reach them. For example, you could make an agreement with yourself that you would put away $400 every month and when you had saved up $2000, you would treat yourself to a $200 shopping spree from the next portion of $400 savings.

• If you are in debt, create small rewards for when you reach milestones. For example, if you had $50,000 in debt, you can make yourself a deal that when you had paid off $10,000 in debt, you would go on a mini $1000 vacation.

• Use a system that is easy and convenient. Check out my next post for some ideas on budgeting systems.

Next: Budgeting-What are some budgeting systems?

Highest Paying Careers/Occupations in US

Top 10 Highest Paying Jobs

Top 10 Highest Paying Non-Medical Professions

Highest Paying IT Jobs

CANADA
Top Paying Jobs

Next: What is budgeting?

Source: Money-Zine

1. Earning money
2. Spending less than you earn
3. Saving and investing what you don’t spend

Yeah, it’s that’s simple, but you can see why this path also takes longer. At the same time, no matter which path you choose, you’ll need to stay disciplined and focus on the end goal.

This method is best for people who have no desire be self-employed or own their own business. It’s best for people who:

• Have a low tolerance for risk
• Are conventional

In my next posts, I’ll tell you about the highest paying careers and jobs, budgeting, income, expenses, savings, and investing.

Next: What are the highest-paying careers and jobs?

If you find that you need to cut some costs, here are some tips for cutting down on your expenses:

1. Examine your largest costs
Expenses such as your mortgage payments, rent, or car payments are very costly. What percentage of your budget are your rent or mortgage payments? You can refinance your mortgage for a better rate or appeal your home assessment to lower your taxes (be careful, this could backfire).

2. Learn to distinguish between ‘wants’ and ‘needs
If you are in the millionaire mindset, you will focus on actions that build your wealth, and will not focus on actions that deteriorate wealth. A need is something that you can’t live without like food and shelter. A want is something that you will survive without like a new TV or cable. If you search for ways to spend your money like window-shopping, you aren’t in the right mindset. Your free time should be spent ways to build your wealth.

3. Save on food
Don’t eat out too often. Everybody knows that eating out costs way more than buying groceries and eating in. Two people could eat very well on $100 a week on groceries, but if they went out to eat for lunch and supper, it would cost them easily over $200. That’s double the amount! Now, if you’re already eating in and want to save on groceries, check out Bargainist, Online Organizing, and About.com.

4. Learn how to cut your taxes
Keep all receipts, organize your taxes and receipts, and apply for as many deductions as you can. That’s the basics of tax reduction, and check back in a little later for another posting about tax reduction.

5. The little things add up
If you spend $2 a day on a coffee, muffin, or another small item, it adds up to $730 in one year. Yeah, it really adds up, doesn’t it! Cut down on those seemingly small, everyday expenses.

6. Pay off bad debt ASAP
Basically, bad debt is anything you owe on something that will not make you money. Get rid of that credit card debt, because it will rob you of your wealth. Credit cards charge monthly interest at staggering rates, often around 18-20%. If you bought a $600 TV with your credit card (interest rate 19%), and you made monthly payments of $25, it would take you 2 years to pay off the TV, and you would end up paying 22% more than the original price tag. This behavior robs wealth. It does not build wealth. You have to think like the wealthy.

7. Cut out the alcohol and cigarettes
Cigarettes are incredibly expensive these days, with the average cigarette pack in the US priced at about $4.20 (as of Sept 30, 2008). If you smoke a pack a day, that’s $1,533 in a year. In Canada, cigarettes cost even more, so the lesson here is that smoking robs you not only of your health but your wealth too. The same can be said for alcohol, which is also very expensive and offers little in health benefits, so cut down on your alcohol spending.

Okay, so in the last article I talked about why strategy is so important. Now, let’s get to some basic strategies for making money. At a very basic level, you can choose one (or a combination) of four main paths. (See Rich Dad’s Guide to Investing for more details).

· Employee
· Self-employed
· Business owner
· Investor

Employee—Obviously, most people become employees, and regardless of your pay, the key here is living below your means and deciding what to do with the money you save. This method seems like the least risky method of earning money, but be aware that nothing is without risks. Every time our economy suffers, layoffs are inevitable, so don’t put all of your plans and dreams in the hands of your employer.

Self-employed—I like to think of self-employed people as your small business owners, contract workers/freelancers, home-based businesses, and consultants. Generally speaking, people who choose self-employment show a willingness to take risks, self-confidence, and independence. An example of self-employment is a hairdresser that runs a hair shop from her home and is the sole employee. The key is that the day she stops working is the day that money stops coming in.

Business owners—The difference between business owners and the self-employed is that business owners have built or bought a system that is successful even if the owner leaves the business for a time. A successful business owner would own the hair shop, hire hairdressers and a manager, and step away from the day-to-day management. That way, she can earn money while not working.

Investing—Investing is another method to making money without working for every dollar. However, you have to know what to invest in. There is a range of risk level, from very safe investments such as federal government bonds to very risky investments such as venture capital opportunities. The biggest risk, though, is the uneducated investor.

Next: How do I get rich by being an employee?

Book referenced: Rich Dad’s Guide to Investing By Robert T. Kiyosaki

In order to get rich, you have to have a strategy. Wikipedia explains that “a strategy is a long term plan of action designed to achieve a particular goal, most often “winning.” Strategy is differentiated from tactics or immediate actions with resources at hand by its nature of being extensively premeditated, and often practically rehearsed. […] Strategy is about choice, which affects outcomes. […] The word derives from the Greek word stratēgos, which derives from two words: stratos (army) and ago (ancient Greek for leading).”

You see, strategy was applied to war. Military leaders knew that in order to win a battle or a war, they had to create a strategy, not just throw men with weapons at the enemy.

The same applies to getting rich. You need to come up with your own strategy. That’s why reading books about getting rich, books that will educate you financially are so important. They will become your foundation, and from them, you will be able to develop your own strategy.

Next: What are some strategies for becoming rich?