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The following is a guest article written by David Burg of “The Wealthy RN.” Enjoy!
Many of us long to be financially free. We yearn for financial independence where all our debts are paid off and we have excess money in the bank. Instead, most of us are faced with money worries that are very real especially in today’s increasingly stressful times.
So, we search for ways to make extra money. To save a little more each month. To possibly retire someday. But everything, and everyone, demands more from us and before you know it, the money is gone.
But what if there was a simple way to increase our net worth without much work involved?
How do we increase our net worth by $50,000 and do it in such a way that is easy to implement and is repeatable?
One easy trick to accomplish this is to hide money from ourselves and then covertly invest it.
“Hide money? Covertly invest?”
Yep, and let’s show you how.
Hide Money from Yourself
Let’s clarify something first: When we’re talking about hiding money from yourself it doesn’t mean that you don’t know where your money is going. In fact, we believe you should be very much aware of your finances and how each dollar is spent.
That’s critically important: To track your spending and to know where your money is going.
Rather, we want to “divert” some of this money before it hits our greedy hands and keep it somewhere where it’s less tempting to touch it. Where it’s easy to “forget” about it since it’s hidden from plain sight. Then we want that money to work for us.
Because it’s a tool and we want it to make us more money. And in our case, we want this to increase our net worth by a cool $50,000!
Let me ask you a question. Is it easier to spend a $20 bill that’s sitting there on your kitchen table in plain sight or twenty bucks that you don’t see because it was moved before you ever actually saw it?
With both options, you know about the money. One is in easy reach. The other takes a few steps, a little bit of work to access it.
That same principle is going to be applied to saving and building wealth. Increasing our net worth is important. It’s a central steppingstone to becoming financially independent. So, we need to use whatever system we can to help us build this wealth.
How to Hide Your Money
Hiding money is not simply stuffing cash under your mattress and pretending it doesn’t exist. It involves four specific steps that may take a little practice but can be invaluable to your future.
Most of us have the traditional checking and savings accounts. One we use for everyday expenses and the other is supposed to be used generally for special occasions, those unexpected expenses that pop up, or for emergencies.
However, moving money into your savings manually is generally a doomed endeavor. For myself, the list of everyday expenses eats away my paycheck until there is nothing left over for savings.
So, we must change the system. It’s a simple trick and takes discipline initially, but once in place can help build your net worth.
Here is how to do it in four easy steps:
- Modify your mindset. Realize that everyday life will take every penny you have and leave you with nothing for later unless you deliberately change your actions. No one cares more about your tomorrow than you do. So, you must plan for it. And then act on it.
- Think automation. Most things in our life can be automated. So, use technology to your advantage financially. I mean if we can program a coffee maker to make life more pleasurable, we can do this!
- Make it hard to get to and out of sight. Move this money to a place where it is not exactly easy to get to or that you look at often. You want to “forget” it exists.
- Allow it to grow.
Ok, let’s explore this in a little more detail so you’re on the correct path.
Changing Your Mindset
Having the right mindset about anything can change your destiny. One thing I learned early on was that I was the one most interested in my future. And no one was going to take care of me. I had to do it myself.
Early on in my career I intentionally set up systems that helped me prepare. I knew it was tempting to spend money I was making. I also came to terms with the fact that my destiny depended upon the actions I do today. So, I absolutely had to save and invest money no matter what.
So, I had to create a fool-proof way to secure that future but still enjoy today (because who wants to sacrifice everything for tomorrow, right?).
I also realized I couldn’t make big, rapid changes overnight. Yes, we’re all prone to the New Year’s Eve syndrome where we promise big changes but rarely carry through. It’s especially true financially.
Easier Tactic: Instead of looking at a big picture amount of how much you need to set aside, concentrate on the day-to-day. Just think “$10 a day” if you need to. Smaller goals are easier to achieve and those wins will encourage you to continue.
So, take it in little steps, intentionally starting small. It is just like being in school for a career: You just take it one day at a time. And then gradually build upon that momentum.
I also knew that the temptation to spend money is very real, so it needed to be out of sight. It needed to be hidden from everyday view. Because it was small and easy to start, it worked for me. And it can work for you as well.
So, your new approach should be: Start small, slowly build, and keep it out of sight as much as possible. Our goal is simplicity and ease.
Ok, here’s the secret sauce! Most of us can automate our finances with banks online. You can often set this up with your employer or directly with your bank. Move those funds to another place before that cash hits your checking account!
- First, set up an appropriate emergency fund because it’s essential. The last couple years have taught us the importance of that. This is survival money. And then automate it with your bank. Have the funds moved over immediately before you get your paycheck. This will give you the peace of mind that you’re taken care of when nasty financial surprises come along. It will then start you on the path to a net worth of $50,000 but more importantly it will be the starting block to free up other cash to really kickstart your path to wealth.
- Second, automate deposits into an investment. Again, start with something manageable and build upon it. This is where the power of growth really happens.
Automation helps to “hide” your money. You didn’t touch that money; it was moved before you saw it.
Your focus should be primarily only on the money in the checking account that’s left over. Get used to living on this reduced budget for a bit. Keep the rest out of view and it will be easier not to touch it. Eventually, it will be easy to forget about the diverted money all together.
Start small if you must but “automate” raises to it each year.
Make It Hard To Get To
This can make you or break you. If you’re a disciplined person, keeping a separate savings account may be sufficient.
If you’re accessing this money too often, then even keeping an account at a different bank can help. This extra measure will trigger a conscious question of, “hey, do I really need this money?”
Once you’ve identified how important this account is, you’ll hopefully have second thoughts about touching it.
Hot Tip: So, let’s pause here for a moment. If you’re the type that can’t resist touching emergency fund money regardless (yes, the ease of online transfers can work against you as well), consider setting up an account you have no internet ties to. Meaning, use a separate bank and make it so you have to physically go in there to access it. Oftentimes you can direct deposit through your employer and still keep it separate from your checking. This will make it harder to touch and thus more likely to grow. I know it’s a pain, but that’s the whole point! Your future self will love you for it!
Investment accounts are easier. They’re designed to be less accessible (often with penalties or restrictions tied to them). And unless you’re purposefully viewing those accounts, they’re separate from your everyday life, unseen from day to day activity which is what we want.
Ok, so your money is hidden, so now what do you do with it?
Allow It To Grow
Now, here’s the exciting part! We all want our money to grow, to increase your net worth by $50,000. There is no better way than to start investing the majority of this money in the stock market.
But, what about real estate? Or precious metals? Yes, those can work as well, but we want a simple trick, easy to set up, and which runs on autopilot. Remember, we want something simple and effective. And this will deliver, trust me.
Many people will skip this step because they’re afraid to step into the stock market because of horror stories. However, this method has worked well for decades to create wealth. So, let’s use it to our advantage!
Here are my two favorites:
- Your company 401(k) or 403(b): This is especially true if they offer a “match” on funds you contribute (it’s free money to you!). It’s easy to set up, it’s automatic, it’s out of sight, and it builds upon itself.
- My absolute favorite – the Roth IRA: It’s almost as easy to set up as opening a credit card. You can automate it. It’s “hidden” from everyday sight. It will grow tax-free!
- Both allow you to move money as it touches your checking account before you have a chance to spend the cash.
- Instead of making the process of “picking funds” difficult, start with something basic like the S&P500 Index Fund. Both offer this. It has extremely low fees and has historically done very well. Keep this step simple for now.
- And as negative as it initially sounds, both have a “penalty” for withdrawing funds before age 59 ½. This is a good thing. It will keep your hands off this money which builds your net worth.
Consider This: Taking just $500 a month and putting it into a fund that averages 10% return per year for 6 years can grow your account to a whopping $49,704! Repeat this exercise and over time that $50k will eventually turn into $500k.
So, yes, a simple trick can build your net worth by $50,000! This method can help you secure a more financially free future. Successfully hiding money from yourself and utilizing simple, proven wealth-building tools will usually cause it to blossom and grow.
Don’t believe me? Well, give it a try. I’m a firm believer that success will spur you on to more determined measures. Are there more advanced ways of building wealth?
But don’t discount the power of a simple system that diverts funds before you see them into proven wealth-building tools.
If you do nothing, life will find excuses to siphon all your money from your future. Your net worth will suffer.
However, as this simple method begins to work, you’ll feel the potential of its promise. It will motivate you to hide more and more of your money, knowing that it’s building something great for you.
Who knows, maybe the idea of retiring early may become a reality versus a dream so many people have.
About the Author: David Burg was born and raised in the rugged Northern California coastline where he enjoys hiking and kayaking along with a love of reading, writing and a bit of jujitsu on the side. He is a passionate Registered Nurse (BSN) who specializes in critical care and flight nursing. He is also zealous about personal finance. What began as a hobby investing as a new grad developed into a passion for finance and capitalizing on swing trading in the stock market. He operates a blog about money management, building long-term wealth, and achieving financial freedom.
Visit his website at www.thewealthyrn.com.