Have you ever seen a hamster running on the little wheel in his cage? Those little creatures put all their energy and concentration into pumping their little legs just as quickly as they can. The faster they run, the faster the wheel spins – but they don’t actually accomplish anything.
For some people, life is a hamster wheel of financial hell.
Middle-class Americans work hard at their jobs to bring home a decent paycheck. But almost as soon as they deposit the check in their account, the money disappears towards their mortgage, their credit cards debt, household expenses, and maybe a couple of new toys. At the end of the month, the bank balance doesn’t look so good. So what do most Americans do? They go back to work, put their nose to the grindstone, and repeat. When a salary increase finally does come their way they raise their cost of living to match it, and at the end of the month the bank account looks exactly the same as it did before.
Like hamsters running and running but never getting anywhere, most people just can’t seem to get ahead. And the amazing thing is that being on the hamster wheel of financial hell has nothing to do with the income that a person makes at their job. People with high and low incomes often find themselves with similar balances at the end of the month – the only difference is how many toys each one buys.
So what is the solution? How can you break the cycle of earning to spend?
Understand the impact of your spending habits. Many people spend their money on things they consider to be “assets”. How do you define an “asset”? Some very liberal financial advisors would call anything that has value, including your car and even your smartphone, an “asset”. While your car and your smartphone certainly have some value, what kind of monthly impact do they have on your wallet? In most cases, a car and a phone cost you money each month. Worse yet, both of them lose value the moment you take them home.
If you take your paycheck and immediately spend it on something that loses value and costs you money each month, what will your financial future look like?
Can you see the importance of taking the time to learn the difference between a good asset and a bad asset? The book Forever Cash can help you classify assets and better spend the money from your paycheck.
Buy your toys with cash flow from your assets. Each dollar that you bring home from work is like a seed with the potential to make more seeds if you plant and water it. Having toys like iPads and large TVs isn’t bad in itself, as long as you don’t pay for them with the money from your paycheck. That money is way too valuable and has the potential to accomplish so much. But if you spend it right away, you lose out on all that money could have done for you.
Invest the money from your paycheck in a cash-producing asset. Then, let the income generated from that investment buy your toys for you. That way, you will have your toy and the asset at the same time.
Running on the hamster wheel of financial hell is a tough way to live, but you don’t have to stay on that wheel a moment longer than you want to. Break the cycle of earning to spend and make smart investments to guarantee your future.