What You Can Afford

Hello, my friend and future millionaire. 

Welcome to this episode of The Money Wheel. 

My name is Don Shade. 

Now, in the last episode, I talked about your lifestyle and the differences between an annual income of $40,000 versus $100,000 a year income.

The point I wanted to make very clear here is this you’re not broke because of the amount of money you make.

You’re broke because you’ve extended your lifestyle to the very edge of your income whether that income is $50,000 a year or $100,000 a year.

The only difference between these scenarios is the people are at two different income levels, since neither has any more cash in pocket than the other.

The difference between $100,000 CEO and a $50,000 factory worker is that the CEO feels that he needs to carry a certain image.

A CEO may buy a Mercedes-Benz while the factory worker drives a Chevy but obviously the debt on both those vehicles is different.

The top CEO will feel that he owes himself a big house with a big mortgage and a fancy gated community whereas the $50,000 factory worker will buy an average house somewhere that fits his lifestyle but may be to the edge of his budget. 

Here’s the problem, and this is why people do not build wealth, they build their lifestyle to what they think they’ll enjoy instead of what they can afford.

Let’s say you graduated from college to work an entry level position and the first year you made $25,000 and created a no frills lifestyle.

Then you get a promotion and you’re making $35,000 and you want more or better things in your life so perhaps you buy a different car or new furniture. 

Now let me make it very clear that there’s nothing wrong with that, but I want you to understand what happens in the long term picture.

You’ve moved your lifestyle up to where you now need all $35,000 to survive and you didn’t put any money aside to pay yourself first.

What you need to do here to build a savings account and to make sure you always have money, is start making a monthly payment to yourself, whatever amount you decide on.

And the way we started that out in the beginning of this, we started out with you putting $5 a week aside to build up to where you had $100 in your wallet, and then we got to $500. 

Well, now that you have that $500 in case, let’s start building a bank account for savings to start building wealth for yourself over time.

And as your skills improve with managing money and the way you spend it, you’re going to get better at the decisions you make and what you do with your money.

You know, it was funny just the other day, I was talking to a couple that wanted to buy a house from me.

Those of you that know my background, I’ve done a lot of real estate deals, and this couple was talking to me and they were saying that they just couldn’t come up with any kind of down payment money to work with without a few weeks to make it happen. 

The issue that I noticed was, as they were talking to me, they were both standing there smoking cigarettes which, at the time of this event, were about $10 a pack for the top brands. 

Well, if you smoke a pack a day over a year’s time, how much money are you spending? 

This is one of the things that I want you to take a look at in your life.

Are there areas where you’re wasting money like that? 

Now, I didn’t say anything to this couple, but think of this 10 years from now, from them each smoking cigarettes, are they going to be better off then than they are now financially or health wise? 

I bring that point up because if they would’ve started budgeting their money a few years back and not bought cigarettes, where would they be today with that money savings and would they have something for a house down payment?

But the issue with the real estate deal was this. They wanted me to do owner financing so they can afford to be in the house.

Are you someone who’s in that position and what I want to make sure I point out to you is this.

It’s never because you don’t make enough money, you make plenty of money, you’re just making the wrong choices with the money you make.

That’s everything I have for this episode of The Money Wheel. 

We’ll see you next time.