Trick Yourself into Building Wealth

Trick Yourself into Building Wealth

November 13, 2021

About 10 years ago, a colleague of mine saw that I tracked every dollar I spent out of my checking account. She teased me about my $5 bagel. Not what I paid for it, but rather that I took the time to track it on a spreadsheet. I explained to her that it is part of a strategy that I use to build wealth and that bagel could save me $1.30 that I would have otherwise spent. Most of our country lives paycheck to paycheck and I was no different coming out of college. I tried saving for my future for the first few years but was getting nowhere. All those unexpected expenses would eat up anything that I had saved as I allowed my lifestyle expenses to increase along with my income.

Something had to change if I wanted to build wealth. Working for the right startup or hitting the lotto wasn’t in the cards for me. If I was going to build wealth, I would need to make small changes to begin the process. As for me in the past, these three tricks anyone can use to start now tricking yourself to building wealth:

  • The first step is no secret and is often talked about. That is, pay yourself first before anything else. You trick yourself to treat this savings as if it is a bill and it is a must to pay. We talk about where to put the money here, but the key is that you make sure to do it every paycheck before anything else. Don’t allow your lifestyle to make excuses to not do it.

  • Rounding is a wonderful thing, use this to your advantage. The next strategy is when tracking your spending (a must when building wealth), you should round all your purchases up to the nearest $5 and round down all of your deposits to the nearest $5. This tricks you to save with every purchase and deposit when using your debt card. By using this strategy over the past 15 years, I have been able to consistently save $1600-1800 per year.

  • Be the bank baby! There is a reason why banks have large buildings, and we live in small houses. They take your savings and pay you next to nothing (lately) for the privilege to lend out your money at a much higher rate. The interest you pay when borrowing erodes your future income. Instead of giving away your hard-earned cash to the bank, it is better to be the bank. Here is how the strategy works:
    • Build a reserve account called “Future Purchases”. This will be for purchases such as cars, vacations, or any other large purchase.
    • Find out what you will be charged in interest and payments. If it isn’t zero, then buy the item with your cash and make the same payments to yourself. This way instead of paying the interest to your bank, you are paying it to yourself, thus forcing yourself to save even more.
    • As you build this account beyond what you need for this purchase, convert the excess to invest in passive income producing investments.

 Wealth isn’t built by one change, but rather several small incremental changes that will set you on the path to financial freedom, or as we call it, Making Work Optional. Over time applying these tricks becomes like a game where you are the winner. Have fun with it and watch your wealth grow over time.