Golden rule number one is to always save something.
So back when I was a single, broke mom and I really struggled to even pay the rent, I knew that I needed to change things. I knew that I needed to turn around both my mindset and my financial situation, and also the energy I had around money. I was consumed by stress around money and constantly feeling broke & like there wasn’t enough. And I really needed to shift my focus from being this poverty consciousness to starting to notice that there was money there and start to get some momentum going on a positive level.
So what I did was I made a rule that I would only spend notes. I used cash for everything. I spent only notes and I saved all the coins. And at the end of that first month, I went to the bank and I banked something like $46 in coins. And I started a savings account.
Now, the really interesting thing was that because I was only allowed to spend notes and had to break a note every time I wanted to spend money, it made me really careful and considerate of the money I was spending. So it actually helped me be more mindful and save money as I was going through the month. And that extra money that I saved in coins, I didn’t really feel like it was missing. And at the end of the month, I had $46, which was a huge amount. And the rule was I had to bank all of it. I wasn’t allowed to use it to pay for groceries or anything else. And it helped me feel like no matter what my situation, I was able to still move forward and start accumulating savings. And that really was the start of a whole new paradigm of things starting to shift, of the tide starting to turn.
So no matter what your financial situation is, you always want to save some percentage of your income. In a perfect world, you’d be saving at least 10% of your gross income. But if you can’t start there, start with 1% and then slowly and surely build your way up. Because as you start, you shift your mindset, you shift the energy around money, and you start a whole new practical pattern that says, “I can save. Here’s the evidence.”
And all of that builds momentum and it grows and grows and grows from there.
Golden rule number two is to use percentages.
I already touched on that with golden rule number one, where I suggested that you ultimately aim for saving 10% of your gross income at a minimum. And ultimately, you want to get to something like 20% of your gross income going straight to your investments.
(And if that freaks you out right now, it’s okay… because as I said, work on percentages and start small).
The reason why working with percentages is so simple, is that you can keep using that same breakdown, no matter what your level of income is. So whether you’re earning a thousand dollars a week or a hundred thousand dollars a week -, if you say that “I’m going to save 10% or 5%” – or whatever the percentage is – the percentage never changes. And so that’s really powerful because it helps you stay on track and it ensures that you always live within your means and that you’re still moving forward. So by having the percentages, it eliminates that temptation of, “Oh, now I’m making more money. How about I spend more money? How about I sign up for a bigger mortgage, a bigger car loan, a bigger holiday, a bigger everything.?”
And before, you know, it, all the money’s just disappearing. And that actually happened to me when my income started to take off and I was making that six figure plus income, but my expenses had all grown to match and there really wasn’t any extra left for me. But by switching to percentages, it meant that I was always allocating money to fun stuff and wealth creation and paying off debt and all the other things that needed to be covered and paid for in right proportions. So the percentages don’t need to change as your income grows, which is a really cool way of making sure that you’re on track, that you’re living within your means, and that you’re also moving forward. So golden rule number two, use percentages.
And then golden rule number three for financial success that should underpin all your basic money management skills is that you get really clear on and you focus on your number one financial priority at any given point in time.
So what this means is that if you want to experience that financial success and move forward and move through your wealth creation plan, you want to make sure that at any given point in time, you are 100% clear on what your current number one focus should be. So that will vary depending on where you’re at in life. At certain stages in life, it might be all about eliminating debt. And then at the next stage in life, it might be about accumulating a buffer – so that should anything happen (like say a global pandemic for example) you have three or even six or maybe 12 months worth of living expenses to fall back on. And at other stages in life, it might be about accumulating money to put into investment or into buying or paying off your first home or boosting your retirement funds.
So it’s important that you continually look at your wealth creation plan and assess “What should my number one priority be right now”, and then within your money management system and the percentages that you’re allocating, there is a certain percentage that gets allocated towards just that one thing right now. And then as that one thing gets ticked off the list, you allocate that same amount of money to the next thing on your list. And you shift your number one priority and your focus to the next thing on your list.
What that does, is it puts you into laser focus mode. And so you accomplish that goal, that number one priority so much faster. The biggest mistake most people make with their money management skills and why they don’t get to experience financial success more easily is that they spray their focus. They’re trying to do everything at the same time. They try to pay off debt, accumulate savings, save for a home, start investing in shares, boost their retirement fund all at once. And so you’re just drip feeding randomly here and there.
When you stop and actually get clear on what your number one priority should be right here right now, then you can put all your focus on that one thing, knowing that you are absolutely focusing on the thing that is most critical, most important for you right here right now, and that will propel you towards financial success, the fastest. And when that box has been ticked, you shift your focus onto the next thing you reassess and decide, okay, what should be next? And you move on to that.
Now, speaking of eliminating debt, if that is your number one focus right now, then I do have this other video right here, which you can watch next to help you ensure that the process that you’re using to clear your debt is the one that helps you eliminate that debt in the fastest, most efficient way possible. So be sure to watch that next.
Now you might already follow one or even all three of these golden rules. So let me know in the comments, which of these golden rules do you already follow? Which ones have you already tried? What’s your favorite? Or maybe which one are you going to try or possibly recommit to next?
Okay, as I promised at the start, I’m going to give you a little bit of an extra bonus before you go.
And that is covering what your basic bank accounts should be, that you have both for your business and your personal finances. And this is actually a lesson straight out of part of the Magnetic Money program, because it’s really important that the practical infrastructure you have in place really supports your money management system. And that is what allows you to then put it all on autopilot and make sure that all the percentages are correct, that there’s always the right amount of money being saved and that everything’s being taken care of, with your number one priority at all times being the key focus. So having the bank accounts in place that allow you to then set up that entire system is really critical. So let’s go through what they should be.
Let’s focus on your business first, and you really need a minimum of two bank accounts for your business.
The two bank accounts that you should have in the name of your business, whether that’s your own name or the name of a company, or maybe something like a trust should be :
Number one, your business operating account. Now that account is the one that all your income will come into and that your business pays all its expenses out of,including your wages (because your wages are then your personal income,). Your business pays its bills, including the wages of its CEO, which is you. So that’s your business operating account. All income for the business comes into that and all expenses, including your personal pay comes out of that account.
And the second business bank account that you really must have is a separate account to park tax money in.
And again, you will use a percentage for this. And the percentage of your gross income that should be allocated and tucked away for tax will vary, depending on whether you’re running a company or not, and how much income you’v currently got rolling through your business. So refer to your accountant, refer to your last year’s, or the couple of years tax returns and make a decision of what percentage of your gross turnover – of the total income coming into your business – should you be putting aside to make sure that you can pay your tax bill. Because you know what? You’re in business to make profit. And usually profit is taxed in most countries. So you want to be aiming to pay tax. Really, you want to be aiming to pay as much tax as possible e ffectively, of course – because it means you have made lots of profit.
So by using a percentage, it means that the amount of tax money you’re putting aside in terms of dollars will always be appropriate for your level of income. Makes it nice and easy and it makes sure that you’re perfectly on track.
Okay, now let’s move on to your personal bank accounts.
So, I recommend that you have at least four personal bank accounts. The first one is your bills account. So the bills account is generally the one that all income or personal income is paid into. And remember, your personal income is not your business’s gross income. It is the income that you receive as wages or salary from your business plus any other household income. So all of it comes into the bills account. And from that bills account, you set up direct automatic debits – because the less you have to think about this, the better – for all your regular household bills. And I’m talking things like insurance, electricity, gas, all those personal expenses that are going to be ongoing.
And then the second bank account that I strongly recommend you have separately is a cash spending account with a spending card, an ATM card, an Eftpos card linked to it.
Now, in our household, we have one of these each – and that’s where all your discretionary money goes into – the money for your discretionary spending, your fun money, the things that you can choose to spend or choose not to spend on. And so each month or each payment cycle from that bills account, a certain amount gets deposited into your cash discretionary spending fun money account. And you get to spend that on whatever you choose. And of course, before you’ve done any of this, you’ve sat down and worked out your entire money management system and made some decisions around what those dollar amounts should be. But you need this infrastructure in place, remember?
So cash spending account means that that’s the money you get to spend on the fun stuff like going out for lunch, or maybe having a massage or whatever those things are. And when the money’s been spent, you’ve had your fun, and you’re not going to be tempted to dip into the bills account, because if you do that, you might have trouble paying the power bill when it comes in, right? So everything is nice and separate.
Now, the third type of account that I recommend you have is what I call the extras or the big splurges account. So you want at least one of these and it’s really short term savings, but for spending on big ticket items or on maybe annual items. So things like Christmas gifts or birthday gifts for the kids or things like your annual family holiday. So you want to have a separate bank account – at least one – to cover those things. And some people like to have several separate bank accounts. They might have a holiday money account and a Christmas and birthday presents account separately.
So, those extra items should be in a separate account because they’re big ticket things that happen seasonally. So you don’t want to mix that up with your everyday spending or your everyday household bills money, and find that again, you might accidentally run short.
And then the fourth type of account needs to be a savings account. Now, depending on where you’re at in life, that might be just a cash savings account, or it might be an investment account, or it might actually be your shares investment that you keep building on, but it’s savings. It’s long-term savings for either emergency money or for investing and growing your wealth. It’s not money that you’re planning to touch anytime soon. So it’s very different to those Extras accounts. They’re not really savings. They’re just you putting money aside all year long so that when Christmas comes, you can buy some gifts for the family.
THIS is wealth creation. So savings/wealth creation. You want to make sure you have at least one bank account where money can accumulate for that and doesn’t get mixed in and diluted by either cash fun money or household bills.
So with all of this, as I’ve already mentioned, the key thing is to have a system in place and to have made those decisions of how much money should flow through all of these accounts before you even get started.
And this is what we do in the Magnetic Money program.
But before most people can go there and set up their money management system, they actually need to start looking at creating that ecosystem and shifting the way they think about money and the way they feel about money so that they can then go on to shift the way they deal with their money.
All of that together is what allows you to unlock your six figure plus income and stop the old sabotage patterns – so that money is flowing to you freely, staying around and you actually know what to do with it. You can put it into your money management system – you can put it into your wealth creation plan – you can let it flow through those bank accounts with the appropriate percentages and give every dollar a job to do. And that is the fast track to success.
So I’ve created a free new Masterclass that I’d love to invite you to watch. It is called “The secret code to unlocking your six figure income”. And it’s available for you to watch right now, free of charge at the link in the comments below. So hop on that now, and I’d love to see you in that Masterclass.