Brian Tracy's Formula for Financial Independence

Happy New Year! It seems fitting for the first post of the year to give you a very simple formula for Sowing Wealth in your future. I learned this from Brian Tracy's audio program, Focal Point, which I highly recommend. You can purchase the book for just $10.20 through the amazon.com box on my blog.

Here's the formula in six steps.

First, spend less than you earn. If you think about it the US would probably not be in the recession we're in right now if we could heed this simple rule. Americans used to be savers. Now, we're spenders. Most of us anyway. If you can't handle this first rule, then you may as well skip the rest of today's post.

Second, learn to live on 70% of your income. You'll see why in a second. This will probably be very hard for you if you're not saving anything right now. But, you know what? You've gotta get there for this formula to really work. Rick Warren, who wrote the best selling non-fiction hardcover book of all time supposedly lives on 10% of his income. Use him for inspiration on this rule.

Third, save 10% for retirement. This would be in an IRA or 401k. Invest for the long-term with a financial adviser you trust.

Fourth, invest 10% in something that's more short-term, growth oriented. For some this may mean a business. For others, property. And for others, precious metals. Whatever your vehicle of choice invest 10% of your income apart from what you save for retirement. You can be a little less conservative with this money.

Fifth, give 10% to charity. This one's become a habit for me because of my Christian faith. For you it may be hard to start if you're only giving 1% or 2% or, nothing. If you need to, start small and work your way up. By the way, I've heard this rule from many others beyond Brian Tracy. It's rare to find a wealthy person who doesn't believe in helping the less fortunate with a portion of what they earn. Bill Gates is a great example.

Sixth, when you earn more, don't spend all of the additional income. Exercise discipline and spend just half of the extra income and put the other half towards steps 3, 4 and 5. By doing this faithfully you'll save and invest more than 20% of your income and your financial independence will be all but assured.

May 2009 be a wonderful year for you in so many ways. If you like this blog please share it with others.