'Get rich! Guaranteed!' was the first in a series of articles that provides simple strategies to help you become loaded no matter what you earn.

In this article, part two, I discuss how spending less than you earn, knowing what you’re worth, utilising ‘the most powerful force in the universe’ and not paying for things you can get for free will help you on your way to prosperity you thought was not possible on your so-called salary.

Spend less than you make

Seriously, it’s that simple. No matter what you earn, if you spend less than you make you’ll become rich. Fact. Conversely, spend more than you earn, even if it’s R10-million per month, and you’ll be in the poorhouse faster than you can say ‘insolvency’.

It sounds easy, yet many people fail. Here are some pointers to help you abide by this most golden of wealth creation rules:

• Budget. The most common reason for failure is the fact that many people have little idea of how much they’re spending, or for that matter, earning. Start by listing all your income streams (e.g. salary, dividends, rental income, etc.) and expenses (e.g. mortgage, electricity, entertainment, transport, etc.) over a given time period.

  Once you’ve listed what you get in and give out you have to draw up a budget that sees you spend less than what you earn.

  You'll find some spending cuts, like chucking your Loftus Versveld season tickets, easy to make. Also curb other non-essential expenses like restaurant meals, movies, travel and so on until you’ve brought your expenses in line with your income.

  Ask yourself what you can live without and then do so. Instead of viewing this budget cut as denying yourself certain things, rather focus on what you will be gaining — wealth beyond your wildest dreams!

  Although there are certain expenses you cannot do away with it’s still a good idea to go down your list of essential spending and identify where you might get away with paying less. You may, for example, shop around for a lower interest rate on your mortgage and consolidate your debt, change your short-term insurance company or get a more suitable cell phone plan when your contract expires.

  Once you’ve drawn up your budget, stick to it and each month you’ll be richer than before.

• Make more money. It’s harder to raise your income than it is to limit your spending. Yet, it can be done.

  Sell your old books and CDs, start a blog with advertisements, drive people to work for a fee or rent out the extra room in your house — every bit helps!

• Budget for budget busters. It’s a sad fact of life that there will be emergencies that you cannot foresee. What if you get retrenched or your car breaks? I suggest a ‘rainy day fund’ equal to three to six months’ salary. Such a buffer should prevent most unexpected events from derailing your plan to spend less than you earn.

• Pay yourself first! Don’t like budgeting? Put some money towards an investment the moment you get paid. By doing this, as long as you don’t continue buying on credit what you now have to do without, you’ve spent less than you earn.

If you find all of this hard to do, why not start next time you get a raise at work? You’re used to living on the money you earn now so just pretend you didn’t get a raise. The same goes for other windfalls like your bonus, tax refunds or extra cash after you have paid off your credit card or other loans.

Charles Dickens had the right idea when he wrote, “Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery.”

Know thy net worth

You might think you’re doing well, but are you really? How would you know if you’re getting any richer if you don’t know how rich you are?

How do you calculate your net worth? Simply list your assets (e.g. your car, cash, house, retirement annuities, etc.) at their current value as well as all your debts (e.g. home loan, credit card debt, etc.). Subtract your liabilities from your assets and voilà!

Once you know your net worth you have a benchmark against which you can judge your financial progress. Do this calculation once a year.

Utilise the most powerful force in the universe

Albert Einstein, known for being a brighter spark than most, once said that compound interest is the most powerful force in the universe. He was, of course, absolutely right.

Every Rand you invest now, assuming a paltry six percent annual return, will double in 12 years. What this means is that, even if you’re not rich in your thirties or forties, if you continue to diligently save and reinvesting the returns, you’ll be wealthy when you hit your fifties and sixties.

It’s vital to go for investments that provide the highest possible returns. If you’ve got time on your side, stomach the risk and invest in the stock market.

This is very important — even a tiny difference in return, when compounded over a couple of years, has a shocking influence on the value of investments. According to Wikipedia, if the Native American tribe that sold Manhattan for 60 guilders in 1626 had invested the money in a Dutch bank at six percent interest and kept it there it would now be worth about €100-billion. If, however, their return was 6.5 percent their investment would be worth over €700-billion! See what a difference a ‘meagre’ 0.5 percent can make when you utilise ‘the most powerful force in the universe’?

Never pay for something you can get for free

This is so obvious it should go without saying, right? Then why own a gold card?

Trying to look rich often prevents one from becoming so! You might impress the cute shop assistant with your gold card, but you’ll be paying much higher annual fees while not getting a great deal more than any other plain ol’ card.

Also, according to Mail & Guardian, having a gold card increases your chance of becoming a victim of fraud. These cards are favourite targets for cloning since they usually have a higher credit limit.

Certain credit cards, like the one from Virgin, have no annual fees. Why pay for something you can get for free?

Of course, credit cards are not the only things people pay for that they could get for free. Why buy a newspaper or magazine when you can read it online for free? Why download ringtones, when you can make one yourself? (To learn how, click here.) Why break the bank for software if using the basic, and often free, version will suffice?

Watch this space for part three in our series on getting gloriously rich...

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