Because most people spend their income on some things that are consumer-driven.
Then, when there is a bank statement in their mailbox, they are afraid to tear the envelope and look at it.
Maybe you are in the same situation. Maybe you receive your bank statement electronically and avoid opening it.
But listen, you need to rewire your mind to look at your spending habits at least once per month. Ideally every week and every day.
And here is how you can do it.
First, take a pen and go one by one item on that statement.
Second, create a scale from 0 to 10, where ten is the item’s highest priority and you can’t practically live without it. And closest to zero are useless items that are consumer-driven. So analyze it and think about whether or not you need to buy these items.
Look, this step has to be your priority.
“Your financial responsibility is to climb up the wealth pyramid and come up with a ratio of your discretionary income.“
For that reason, let’s talk about it in the next step…
5. Finding Your Discretionary Income And Your Ratio
In the previous step, you’ve analyzed your monthly bank and credit card statements.
Now, the financial responsibility in this step is to find your ratio.
It means the amount of money you are going to invest regularly in your brain.
If your monthly salary is US$5,000 and after you pay all your necessities, your discretionary income is US$500. So your savings ratio is 10%.
Frankly, does it motivate you to save that money, spend it for no reason, or wouldn’t it be better to invest part of it in your brain?
Honestly, how are you currently spending your discretionary income?
Do you see where we are going with this?
Still not getting it?
Look at it this way.
If you find that your savings ratio is 10%, try to look at your spending habit, again and again, remove unnecessary items, and look for ways to increase your income.
“If you want to distinguish yourself from the masses, you need to reinvest in your brain at least 30% of your savings ratio.“
It’s hard, isn’t it?
And here is why…
4. Allocate 30% Of Your Discretionary Income In Your Brain Budget
I hear you now, and some of you may be arguing with me that 30% is an unachievable number.
But listen, if you want to speed up the process to achieve better financial responsibility and climb higher in society, you must invest at least 30% of your discretionary income in your brain.
And even if your income decreases or increases, the ratio should remain the same for the entire period of your personal and professional development.
In other words:
If your savings ratio is 10% and your discretionary income is $100, then invest $30, which is 30%.