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 to complete and you would only have to do it one time? (Hint: it does not involve robbing a bank.)
Some of you are getting excited while others think I am full of it.
What if I told you that the wealthy, the government, mutual fund companies, and many of the other companies you deal with are already using this strategy?
I’ve even used this simple trick to go from $10,000 in credit card debt to having close to $1 million in savings.
Would this make it more believable?
The Simplest Way Ever To Become Rich
So what is this revolutionary way to become rich? Simply put, it is called paying yourself first.
I know, it doesn’t sound revolutionary. But if you aren’t saving anything, paying yourself first is revolutionary.
This is because you will actually start saving money and change your financial life as a result.
Think about this for a minute. Look at your life right now. If you keep earning and spending money the same way for the next 10 years, where will you be financially?
If you are living beyond your means today, you will be in worse financial shape in the future.
You will have more debt, more stress and headaches, wondering how you are going to survive this month.
If you are just scraping to get by today, you will be just barely getting by in 10 years too.
The bottom line is you can’t become rich or even break the paycheck to paycheck cycle if you aren’t saving anything.
But if you do start saving money, your finances will change. You will have money when emergencies happen.
You will have money to enjoy life more. And you will have money to retire one day.
Still skeptical on how paying yourself first will work?
When we first started paying taxes to the government, we had to mail in huge checks by April 15th based on our income from the previous year.
Back then the government never withheld taxes from our paychecks.
But the government quickly found out that most people spend first, save later (or never save at all) and as a result, didn’t have the money pay their taxes.
The solution was simple. The government started to pay itself first. The government takes its money from your paycheck before you get paid.
This guarantees the government always gets their money.
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.
But, you never get a bill for this fee. 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 their fee (the fee you are essentially paying) off the top (paid itself first) and the return that was left is what you earned.
The common theme here is that by taking their money first, they guarantee they get paid.
And if you pay yourself first, you can guarantee you will build wealth.
How To Become Rich By Paying Yourself First
So how can you take advantage of this concept yourself and become rich? Simple really.
Whenever you get paid, you have to make it a point to put a portion of your income into savings before you spend a dime.
And today, it is easier than ever to do this. Here are the best ways to make paying yourself first simple and easy.
Invest In Your 401k Plan
Your first option to pay yourself first is your 401k at work. That money gets taken out of your paycheck first, even before the government gets their cut!
By investing in your 401k plan, not only do you pay yourself first, but you also lower your taxable income.
This means you end up paying less in taxes for the year. Therefore, if you are covered by a 401k plan at work, make it a point to start investing in it.
Set Up An Automatic Transfer With Your Employer
Many employers not only offer to direct deposit your paycheck, but they also will split your paycheck for you too.
In most cases, you simply have to fill out a form with your savings account information and the percent or amount of money you want to put in your savings account.
For example, you could choose to have $20 deposited into your savings account and the rest into your checking account.
Filling this form out will take you less than 5 minutes. The only information you need is your account number and the routing number of your bank.
Set Up An Automatic Transfer Yourself
If your employer doesn’t offer to split your paycheck you can do it yourself.
Log on to your bank account and set up a recurring transfer there. Just schedule it for the day you get paid and the amount.
Going forward, money will automatically transfer to your savings account on the date you selected.
When it comes to paying yourself first by putting money into a savings account, you need to be smart about it.
By picking a bank that offers a decent interest rate, you will grow your wealth faster.
Here is how I earn the most money on my savings while still keeping my money safe.
I have my savings account with CIT Bank. They are an online bank that offers one of the highest interest rates in the country.
And this makes a difference over the long term. For example, let’s say you have $1,000 in your savings account earning just 0.50% interest.
At the end of the year you will have made $5 on your money.
But if you took that $1,000 and saved it with CIT Bank and earned 2.25%, you would make $22 on your money.
And thanks to compound interest, as the years go by and you save more money, the interest you earn explodes.
Look at your savings balance between these 2 bank accounts assuming you save $1,000 a year for 20 years.
By just choosing the right bank, you can make your savings go farther.
To open your free account with CIT Bank and reach your savings goals faster, click here.
Supercharging Your Path To Wealth
Once you are saving a set amount of money each month and are earning a decent interest rate, you might think all is well.
While this is a huge improvement over not saving anything, there is one more thing you can do.
Back when I was growing up, I paid for everything in cash as debit cards weren’t an option and I couldn’t get a credit card as a teenager.
Since I paid cash for everything, I always had spare change from my purchases.
I don’t know why, but I always took this spare change and put it into a jar.
As the end of the year approached, I sat down and organized the change and rolled it up into coin wrappers and took it to the bank.
I regularly would end up with $200 or more that I would deposit into my savings account.
Fast forward to today and I still use this trick. But thanks to technology, it is simpler than ever.
I pay for most everything with debit or credit cards, so there is no collecting of change.
As a result, I don’t need to spend a Saturday afternoon organizing the coins and wrapping them either.
I simply use an app that does the rounding up for me.
There are two apps that I have used and recommend. You can choose the one that best meets your needs.
The first is Worthy Bonds. They offer you 5% interest on your savings.
The process is easy to set up and once you set up your account, you don’t do anything else. Everything is taken care of for you.
Understand that this isn’t a savings account. The way Worthy Bonds work is they take the money you save and loan it out to small businesses.
Worthy charges these small businesses interest on the loan and part of that interest is paid to you.
So while this isn’t a savings account, it is one of the safest ways you can earn 5% on your money.
If Worthy Bonds interests you, you can click here to get started.
The other option to save your spare change is to invest with Wealthsimple.
This is an investing app, so your spare change will get invested into the stock market.
As with Worthy, you take 5 minutes to set up your account, and Wealthsimple will take care of the rest.
You never have to invest any money other than your spare change, but the option to save lump sums is available.
To get started with Wealthsimple, click here.
How much money can you expect to save with either Worthy or Wealthsimple?
By rounding up my purchases last year, I saved close to $750. Add in the 5% interest I earned from Worthy, and my total savings come to just less than $800.
My friend uses Wealthsimple and in 1 year his round ups came to roughly $1,000. Add in the interest earned and he totaled more than $1,000.
Here is what your savings will look like with each option. We will assume that you save $1,000 a year for 10 years and earn the following interest rate on each account:
- Traditional savings account: 0.50%
- CIT Bank savings account: 2.25%
- Worthy Bonds: 5%
- Wealthsimple account: 8%
As you can see, earning a decent interest rate has a major impact. I just caution you not to focus solely on the interest rate.
This is because when you invest in the stock market to earn a higher return, you do risk losing some money if the market drops.
This isn’t to say you should avoid the stock market, but rather understand how risk and return are related.
Your Path To Grow Your Wealth
The best option for you to grow your wealth by paying yourself first is to take a combination of ideas.
This is what I have done and have had tremendous success with it.
The first step is to set up an automatic transfer to a savings account. When I first started out, I was saving $20 per paycheck or $520 a year.
As my income grew, I slowly increased my savings to $100 per paycheck or $2,600 a year.
Additionally, I was investing my money too. When I started, there were no apps that rounded up my purchases.
Instead, I was investing $25 a month in to a low cost mutual fund.
- Related: Learn how to invest in mutual funds
Again, as the years passes and I earned more money, I increased my investment amount to $150 a month.
Fast forward 18 years and here is where I stand.
The best part in all of this is that once I set everything up, there was close to zero additional work for me to do.
I would only work on this when I wanted to save more money.
If I didn’t do this I would be in the exact same financial shape I was 15 years ago. How sad is that? By just taking 15 minutes to set up an account and a monthly transfer, I have close to $100,000 to do whatever I want with.
I could use it for retirement. I could buy a car. I could take a couple killer vacations. All because I took advantage of the simplest way ever to become rich.
Why Automating Works
It’s no surprise that we are all busy creatures. We forget to do things all of the time.
You intend to invest some money this month but then a text comes in or it’s your turn to play Words With Friends and you forget to make the investment.
By automating, you never have to remember. It is already taken care of for you. You are guaranteed to save or invest.
Better yet, it works because you never think to cancel or stop the transfer.
Think about your expenses. I bet you have a handful of expenses where you are automatically charged for a service every month.
Companies are basically using automated savings in reverse to get you to pay for their service. They know that if they can sign you up for automatic payments, odds are you will always pay.
The only way you wouldn’t pay is if you canceled the auto pay feature or you didn’t have enough money in your checking account.
And if you don’t have enough money, chances are they will just charge you with an additional fee so that they make even more money off of you.
In fact, I am guilty of this! I bought a couple magazine subscriptions from a company online to save money. They told me that my subscriptions would automatically renew.
I made a note to cancel the auto-renewal feature about a year ago. Have I canceled? Nope. I just got an email letting me know my subscription renewed!
If companies, the government, mutual funds, and the rich are all using this strategy, there has to be a good reason behind it.
After all, they all rake in millions, even billions every year. The reason they use this is because it works.
I’ve had it work for me. I’ve had it work for friends of mine who I have helped with their finances. I am sure it will work for you.
All you have to do is take 10 minutes right now, open a savings account with CIT Bank, and set up the transfer and never do anything again in order to become rich. (OK, you might want to go in there every so often and increase the amount you are saving, but you don’t have to.)
How easy is that? The key though is to do it before your friend plays their turn in Words With Friends so you don’t forget!
So log into your bank account and set up an automatic transfer to your savings account.
Do it when you get paid or just pick a day of the month. Don’t get caught up thinking about how much to save either. Set it up for $20. Just do it.
The simplest ways ever to become rich is paying yourself first. Make this effortless by using automation to your advantage.
You can spend time with your family, working on hobbies or even sleeping and you will be saving money.
Set it and forget it. It doesn’t get easier than this.