About two-thirds of Americans say their household spending increased last year, but only about four say their income increased during the same period, according to a survey by The Associated Press-NORC Center for Public Affairs Research. Only one part.
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So if Americans are overspending and their incomes aren't increasing, what is the main problem at hand? The problem has to do with budgeting. Most Americans are overspending and don't budget properly, especially as incomes have stagnated in a tough economy hit by rising prices.
Robert Kiyosaki, personal finance influencer and face of the Rich Dad Poor Dad brand, offers advice on how to get rich and live a rich life, but he's run into problems with budgeting. I have countless tips to help people who are facing this.
According to Kiyosaki, budgeting like a rich person is one way to become rich yourself.
Part 1: Pay yourself first.
“Most people want to donate to charity, invest in property, and save money, but the problem is that they think of it as something they should do after paying their expenses.” Kiyosaki's blog explains this in detail. “[Make these things] expenses [your] Create a budget and make it a priority. ”
Many of our personal financial anxieties revolve around the need to survive in the present. For example, people who live paycheck to paycheck may have trouble making ends meet. For people facing financial difficulties, the main focus is just getting through the next month.
As Kiyosaki outlined, to build wealth, or “budgeting like a rich man,” you must set aside money for philanthropy and investments as part of your monthly budget.
This may seem like an impossible feat, but even putting a small amount of money aside every month can snowball into something bigger in the future.
Kiyosaki recommends the “3 piggy bank system.'' Under this system, 70% of the money you receive each month goes toward your bills, and 10% is allocated each to savings, investments, and charity. In this case, money is divided into categories that can increase wealth, but expenses such as rent still continue to be paid.
Paying yourself first is one of the key factors in budgeting like a rich person. Basically, you are saving money now for your financial future.
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Part 2: Track your expenses
“When evaluating this year's budget, look at the spending section,” Kiyosaki said on the Rich Dad website.
Expenses can be one of the main reasons for not sticking to your budget.
Tracking your spending makes it much easier to determine where your money is going. Does it go to the right place? Or are you spending too much on non-essentials like new shoes, the latest technology, or tickets to a popular musician?
Kiyosaki cautions against spending too much money on non-essential goods and services, and instead focuses on purchasing items that will lead to professional and financial growth. Examples of this might be buying a book on real estate investing or hiring a qualified financial professional to help you build wealth.
“When you look at most people's expense columns, they are filled with payments to others and debts,” Kiyosaki says.
Simply put, debt is unpaid money that is holding back your financial growth. Having more debt than assets can put people into tough financial situations.
Staying away from debt, such as borrowing money from others or paying for expensive subscriptions, can help you allocate more of your income to stocks and real estate to earn money passively.
Part 3: Increase your assets
“Increasing your assets through investments such as real estate increases your monthly cash flow, which allows you to purchase luxuries and debt,” Kiyosaki said.
Monitoring your spending is a very important skill you need to budget like a rich man, but it's also important to learn the proper techniques to grow your money.
According to Kiyosaki, increasing cash flow through passive income is one effective way to increase wealth.
Examples of passive income include real estate investments and stock dividends. This could also come in the form of book royalties. The point of passive income is to put in the initial work and investment and let your money grow naturally over time.
“If you want a nice car, invest your money until your assets generate the cash flow needed to buy that car,” Kiyosaki says.
By focusing on the future, you can develop a growth mindset. A $100,000 car may be out of reach right now, but by putting your money toward assets instead of spending it, your luxury car dreams could become a reality in the future.
Part 4: Overcoming difficult times
The final budgeting tip is not about how to save or spend, but how to emotionally overcome the inevitable worries and difficulties that come with money.
Everyone's relationship with money is different. Some were taught to live frugally, while others grew up surrounded by great wealth.
Financial conditions are constantly changing, and when Kiyosaki started building his brand, he had no capital. One of Mr. Kiyosaki's first tasks was to hire a financial advisor, or bookkeeper. Mr. Kiyosaki was instructed to develop a plan and maintain a “three piggy bank system.” There was a time when Mr. Kiyosaki was unable to get the system back on track as he incurred large amounts of debt from creditors.
“By overcoming difficult times, you develop a mindset that allows you to make more money no matter the situation,” Kiyosaki said.
Still, Kiyosaki pushed through.
“The temporary pain was necessary to strengthen my financial education, spend money on acquiring assets, and reach my goals. [a] Financial freedom is the goal. ” Kiyosaki said.
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This article originally appeared on GOBankingRates.com: Robert Kiyosaki says to get rich, you have to budget like a rich man — follow these 4 budgeting tips
