July 15, 2024

Vagmare.com

The Intersection of Information and Insight

How do I begin investing? Start with a Wealth Formula

5 min read

Are you wanting to start investing to make your money work harder, but don’t know where to start?

As a beginner, you are clearly going to need a certain amount of capital in the form of savings.

I often get asked questions like;

How much should I be saving? or How much do I need? and even How do I become wealthy?

It pays to have a plan, a strategy, or a goal to be working towards and once you understand where you need to be, then you can play how to get there.

You should then consider using this Wealth Formula, that I learned from Tom Corley.

The 20% Rule – Pay Yourself First

I have heard many successful people state you should pay yourself first, so let’s start with the 20%

Pay yourself 20% of your after-tax income the moment you are paid.

For every $100 you receive, this means $20 goes to you, as investment seed capital.

There are so many good apps out there to assist with tracking where your money is going these days and they can come in very handy for this exercise.

I find the easiest thing to do, is to open a separate account, that you can immediately transfer the 20% across to.

I find by paying myself first, I am not tempted to buy an extra pair of shoes or allocate parts of my seed capital to needless spending.

I am committed to my goals and can’t be side-tracked.

The 80% Rules – Living Expenses

Next up, after subtracting 20% of your after-tax income, you are left with the remaining 80%.

So, for every $100, after paying yourself $20, you will be left with $80.

80% of your income is for pretty much everything else and I am certain that there will be many sub-sections here…….

Things like your rent or mortgage payments, food, utilities, entertainment, holidays, gym, etc, etc.

This is where it can become tricky, as many people don’t track or understand what they are spending at certain times.

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