How I'm growing my net worth...

With many people having asked me about my saving and investing habits recently, I thought I’d share the processes and habits I follow to grow my net worth as quickly as possible. Some of them are generally held investment approaches, some are common sense, and some are unique, but here goes:

• I always pay myself first. I get paid by my employer on the 25^th of the month, and pay myself (from my two businesses) on the 27^th-28^th. On the first day of the following month, I do my monthly allocations (explained in the points below) to my saving/investment accounts. This way, before any bills are paid, I ensure that I have tucked away money for my future. My future prosperity is more important than paying small bills (and besides, I know that I can always make more money to cover the bills somehow, so they never go unpaid).

• My first monthly allocation is as follows (as adapted from T. Harv Eker’s book “Secrets of the Millionaire Mind”): I take 10% of everything that came in the previous month, and put it into a ‘retirement account’. I treat the money in this account as no longer mine – it is to be accessed when I retire, and not a day before. This I use to buy retirement products (annuities, pensions, etc.), or invest in various unit trusts.

• My second allocation is my ‘small business’ allocation. I take 5% of what came in the previous month, and put it into an account which is dedicated to lending to, and investing in, other peoples’ small businesses. I remember how hard it was (and is) for me to find funding whenever I have wanted to launch another business, so this is my way of giving back to the small business community which is very much responsible for my success so far. I generally lend this money at a decent interest rate (to give me a good return on the money), but I don’t request as much security as the banks do. I invest in the entrepreneur, but am quite prepared to lose the money that I allocate this way.

• For my ‘retirement’ allocation, I adjust the percentage tucked away upwards by 10% every 6 months. Thus, when I started, I was putting away 10%. 6 months later, I increased the allocation to 11%; and then another 6 months later, to 12.1%. This method was adapted from Dr. Demartini’s book “How to Make One Hell of a Profit and Still Get to Heaven”, and is based on the premise that the human mind can take a 10% change in anything without any mental disruption.

• Once I’ve made these allocations, my money is free to be spent in any way I see fit. I could pay bills, spend it on entertainment, save it for a holiday, whatever. Generally, I keep my living costs very low, to ensure that most of my income is freed up to use differently from month to month (as I’m guaranteed to come up with some new thing or idea to spend it on!).

• I drive a 21-year old car, which is fully paid off. This doesn’t mean I’m a miser driving around in a heap of junk, either. It’s a 1988 BMW 325i. I’ve had it for 8 years, and it runs as well as the day it came off the production line. It still goes like clappers when I need it to, and fulfils my need for speed without any problem! I maintain it meticulously, and it looks after me just as well. I don’t see why I need to have the worry of a bank repayment hanging over my head every month, paying for a car that looks as good and goes just as well as the one I already have. Yes, I will ultimately buy a fancy-ass sports car one day, but I have other aims and dreams to fulfil first (like being a millionaire by my 27^th birthday).

• I still live at home with my parents, which obviously saves me a small fortune. Now I know that this option is not always viable for everyone, but there are always ways to bring your accommodation costs down (share with others, move in with a family member for the short-term, downsize where you live, etc.). Personally, I have made the choice to take the funny looks from people (“You’re 25 and you still live with your parents?!?”) in my stride, because I know it’s accelerating my advance on financial freedom exponentially.

• My other living expenses are minimal. Entertainment-wise, I obviously still go out and have a good time with friends and colleagues often (I am still a young man, after all), but I just don’t go completely mad and splurge every time. I’ll have people around at my place, or alternate nights on the town with house-parties. I have a great social network, so it’s definitely not like I’m sacrificing my youth for financial gain!

• I reward myself for my hard work and financial discipline. Eker’s book suggests that you put away 10% of your income to a ‘play’ account. This is meant to be spent every month on things that makes you feel wealthy and happy, and is a balance against the 10% put away for retirement. I don’t quite follow this principle to the T, but I do indulge myself every now and again. Whether it’s a meal at a really fancy restaurant with my girlfriend, or a new gadget for myself, I don’t feel any regrets about spending money on myself. I put in the hard work to make that money, so I owe it to myself to enjoy it.

• Another way I reward myself is taking time off often. It might change slightly now that I’m working for someone else too, but generally I would go away on holiday 4-5 times a year. Even if it’s only a 4-day long weekend an hour down the coast, it allows me to recharge my batteries, re-connect with myself, and stoke my fires of inspiration.

• Every time I walk past money on the ground, I pick it up. Every time. This is my way of saying to the universe that I appreciate it presenting me with a money opportunity, and always look forward to it bringing me more. You might think this is silly, but I come across business opportunities (and have them brought to me) nearly every day, so I must be doing something right!

• With the money that I have left, after doing my allocations and paying for monthly expenses, I have plenty of options. Generally, if I don’t have a specific purpose for it, I will invest it in growing one of my businesses, or put it away into alternative investments. Currently, I am saving up for an extension to my limousine fleet, so I put away some for that when I have it. I have also set myself the target of having a million bucks in a liquid investment by the time I’m 30 years old. For now, my chosen vehicle to get there is investing in unit trusts. If, a few months or years from now, that goal changes, that’s fine. Whatever I have in that account or vehicle will have been a good investment up until that point, because I know that I saved the money, and didn’t squander it on useless junk. I will then be able to use it to start another business, or invest somewhere else – only the future will tell!

Over time, I’ll probably remember something else useful, or come across an interesting wealth-building strategy – I’ll be sure to share it with you…