What if I told you there was a simple way to become rich? Would you be interested? What if I told you that it would only take you 10 minutes max to do and you would only have to do it one time? Some of you might be getting excited while others now think I am full of it. But what if I told you that the government, mutual fund companies, the rich and many of the companies you deal with are already using this strategy? Would this make it more believable?
So what is this revolutionary way to become rich? Simply put, it is called paying yourself first. I know, it turns out it isn’t revolutionary after all. But many people and businesses do it already which proves it works.
Think about it: when we first started paying taxes to the government, we had to mail in huge checks come April 15th. The government never withheld taxes from our paychecks at first. But it found out quickly that most people spend first, save later (or save never) and as a result, could never pay their taxes. The solution: the government takes its money from you first. They pay themselves first. This guarantees they always get paid.
Mutual fund companies do the exact same thing. If you invest in a mutual fund, you pay an annual expense to keep the fund running. What, you never get a bill for it? That’s because the mutual fund takes the money out of the fund first. If a mutual fund is charging a 1% annual fee and it returned 5% for the year, it really returned closer to 6% for the year. The fund took the fee off the top (paid itself first) and the return that was left is what you earned. (You can learn more about mutual funds in this post.)