We continue in The Money System That Never Fails with The Most Important Part of the Money System.
If you missed the first couple of parts you can view them here:
This system started with the book, The Richest Man in Babylon by George S. Clason. This old classic can be found for free online in many places online such as this link here.
The first chapter is the most important but it all is worth reading and re-reading. It’s about paying yourself first, i.e. saving. The is probably the most important principle of money there is, period.
The principle is this: “A part of all I earn is mine to keep.”
This is counter to Parkinson’s Law, which originally meant “work expands so as to fill the time available for its completion”. This applies to money as well, in that the more money we make, the more we typically spend. Most people these days are spending more than they’re making with the pervasive use of credit. And our governments certainly aren’t good role models either.
Instead of fighting the natural urge to spend, by paying yourself first, you’ll be saving despite Parkinson’s Law.
This is how most people handle money (and how I did for years):
Typically, this doesn’t leave much left in savings, if anything. Once again, many people spend all that they make, thus there is nothing left on the right side of this equation. This is living paycheck to paycheck.
But this equation can be easily flipped, by utilizing this foundational principle that allows wealth to build.
We simply take the savings out of the income, off the top, and then spend what is left. It really is that simple.
“A part” – We’ll cover how much shortly.
“of all I earn” – From your income.
“is mine to keep” – Gets saved.
That also means, the other part, is what is left over for spending for both the necessities and the luxuries.
I knew of this principle long ago. But I made some errors in dealing with it. And I realized that, for most people, for it to actually work, there needs to be a few different types of savings. Then money must be saved in specific ways for you to benefit from this principle.
However important saving is, it is just one factor of many. While we can save our way to millions, it is by no means the most interesting aspect. It must be balanced, with the other areas of money too. Eventually, once your savings grows it will look like this:
That will be discussed more later. Notice that there are four different types of money here already referred to in the last section.