The 40 Percent Rule – The Key to Instant Wealth Creation
Are you looking into making money this new year? Have you decided that this is your year of breakthrough in your financial life? I bet you have, and let me introduce you to a financial rule called ‘The 40 Percent Rule‘.
What is the 40 percent rule?
Most people want to acquire wealth by all means and they are ready to do anything possible to achieve it as far as it is legit.
I am sure most people reading this post don’t even know what the 40 percent rule is all about and that is why they are here. Others may have heard about it because they either read it in a book or blog post, but have not taken action in applying it into their financial lives.
The 40 percent rule is a game-changer when it comes to wealth building. I have read so many books on finance and investing and only a few do mention it. I got a better understanding of it after reading The Millionaire Playbook by Grant Cardone.
That book gave me a different perspective on wealth building. The 40 percent rule is an aggressive game plan to help you become a millionaire in the future. One concept in the book was talking about saving to invest and not saving to save.
That’s where the 40 percent rule comes in.
That concept talked about saving 40% of your gross income in a sacred account until you are ready to use it to create more income for yourself by either starting a new business or investing the money in an asset that generates good income.
I loved the concept because I was tired of the old-school idea of everyone saying SAVE 10% of your income every month and invest it to create another stream of income. How long will one save 10% of one’s income before it can get to the exact figure they have in mind when their monthly earning is not even big?
40% is a huge lifestyle change mostly for those living paycheck to paycheck with debt at the side. I must confess that this rule will leave you broke for some time, but it is how the wealthy build their wealth.
The Rich Vs Wealthy
I know you know that there is a big difference between rich and wealthy. You get rich before you get wealthy. Like most millionaires will say, “it is not the amount of money you earn that makes you rich, it is how much time you have left.”
Wealth is measured with time. How much time do you have left after engaging in money-producing activities and how much do you make during those free time? Like you must have heard, the rich make money even while they are sleeping.
If you have not reached that stage, then you ain’t wealthy.
What is a Sacred Account?
Now, when I am talking about sacred accounts I don’t mean savings account that you won’t touch. Please, don’t make the mistake of putting the money you won’t touch for years into a savings account. Instead of making money, you will end up losing with either bank charges or negative inflation.
When I say sacred account, I mean an investment account. An investment account can be a Mutual Fund Account or a Money Market Account. I don’t encourage you to go for Fixed Deposit. The interest is closed to nothing. I did it last year with 100,000 and what I got as interest was a 4% yearly yield. It is not as good as before again due to inflation. A Mutual Fund or Money Market Account still beats it by far. You can reach out to wealth managers to help you with the best options out there.
A Money Market or a Mutual Fund account gives you better interest in your invested money. A Money Market or a Mutual Fund account also gives you protection over your invested money.
This means you don’t lose your invested money at all. Instead, it increases with time and you get paid dividends every four months. I will advise that you indicate in the application form that your dividends be reinvested into your account.
With a sacred account, you are using your money to make more money without you doing anything.
How to Start The 40 Percent Rule?
It starts with you making the decision first that you are going to start saving 40% of your income in a sacred account that you will use later to create an asset (another income stream).
More importantly, you should first decide what you will do with the money you are putting into your sacred account. It can be to invest it into real estate or start a business of your dream. But, even if you don’t have any idea of what you are going to do with the money in your sacred account for now, just do it.
You can never tell what might come up on the way. A good profitable business idea may just come up in your mind or someone may introduce a business opportunity to you that will need money to invest in. This is where you now go to your sacred account and make a withdrawal.
Pull the Trigger
Normally, it will get to a time when you will need to dip into that money in your sacred account and invest it into something that will create wealth for you. How long it will take you depends on your target.
One of my mentors saved for 6 years before he pulled the trigger. He invested that money into a business opportunity that got him 10 million in profit within two years. Have it in mind that he was confident about the business before he pulled the trigger. He didn’t gamble.
He could do it because he had excess cash in his sacred account. There are so many business deals that come every day that most people miss out because they don’t have the cash available.
This was the reason I said earlier that even if you don’t have anything in mind, just put that 40% of your income into a sacred account and stay as if that money doesn’t exist in your life anymore until a confirmed business opportunity comes up that you are certain about.
So, are you ready to apply the 40% rule to your financial life? I won’t force you to apply the 40% rule in your financial life as I know you will.
You can drop your questions via the comment box if any.