Mastering money can be understood as a game with its own definitions and rules. One goal of this game is to produce wealth. Wealth is money and the things it can buy, that you keep and use throughout your life. When you use this wealth in a way that is congruent with your life’s purpose you experience abundance.
Accumulating wealth can also lead to financial independence. When you are financially independent the wealth you have accumulated produces enough money to cover your regular living expenses and you no longer need to earn additional money by working.
How anyone does this may seem like a mystery to you now. Certainly, neither of us understood it at the beginnings of our journeys. One series of allegories that explain the journey clearly is found in the 1926 book, The Richest Man in Babylon by George S. Clason.
In this story, set in ancient Babylon, a rich man mentors a young man and slowly teaches him the rules to creating wealth. These rules are just as valid today as they were nearly 100 years ago, which probably accounts for the continuing popularity of the book and the many summaries of it available online.
Your chances of successfully producing wealth depend upon you understanding and following the time-honored guidelines included in Clason’s book and most other books on financial success. We list several other books we like later in this chapter.
Critical Fundamental Information
Basically, there are only a limited number of things you can do with money.
There are an infinite variety of ways to do each of those things, but these are the basics.
You could choose to borrow money in order to spend or invest it. Sometimes this can be useful and sometimes it will lead to unexpected problems. It’s best to listen to sound professional advice before you do this.
In any case, borrowed money cannot count as wealth. You must repay it with money you earn or acquire in some other way, perhaps as a gift. However, that gift is available only because someone else has earned, saved or invested money.
When I first started to learn about money, I encountered this revolutionary affirmation, “Part of all I earn is mine to keep.” Until that day (sometime in 1976), it had never occurred to me that anything other than earning money, saving it to spend later or spending it immediately were possible. I had never considered the possibility of deliberately achieving financial independence. In fact, I don’t think I even knew what those words meant.
This adult education class also came with a set of instructions about how to start my own journey toward financial independence. It was designed to deliberately focus my awareness on making conscious decisions about money and ultimately having enough money to live comfortably without working.
I chose to follow these simple instructions.
Each time you receive money put it into 4 different savings accounts—each with its own set of guidelines. (This was before the days of outrageously high bank fees. Using this method today probably would cost much less if you use just one account and keep careful records of each pot of money.)
1. Income: Deposit all the money you receive into this account and transfer it from there into all your other accounts. This includes a checking account you use for everyday purchases and the other savings accounts. The rule for this account was “always take out less than you put in.”
2. Financial Independence: Deposit a regular percentage of your income into this interest-bearing account. The rules for this account were “never take out the deposited money but always take out the interest and spend it consciously for your own benefit.” The goal of this account was to eventually have enough interest to live on.
3. Large Purchase: Deposit extra money into this account. The rule for this account is to “spend it all on purchases that bring you personal pleasure.”
4. Investment: Deposit whatever you choose into this account. This rule is “only take money out when it will be reinvested at a higher yield.”
What Happened Still Amazes Me
In the first year I managed to add $1000 to my Financial Independence account and spent the small amount of interest on an ice cream treat. Then, sometime in 1977, I read a book that jolted me into awareness of investing. It was the first book I had ever found that clearly explained the basic mechanics of investing. I was so excited that I read it twice within 3 days of receiving it!
Reading The Joy of Money: The Guide to Women’s Financial Freedom by Paula Nelson changed my life. I very carefully selected a top-rated mutual fund, opened my first investment account and started keeping records.
Click Follow to receive emails when this author adds content on Bublish