Achieving financial freedom starts with having a plan and the right set of beliefs which can help you to execute that plan. If you have a plan only, and don’t do anything to develop the right set of beliefs or values, you’ll find it impossible to stick with that plan long enough to get any kind of results.
When it comes to achieving success in your personal finances and building wealth, one of the most important beliefs you can develop is the belief that you should always be spending to add value to your life.
This is the foundational principle behind PowerSpending and the key to developing financial freedom. In this article, we’ll look at a few examples of how spending for value can make a great deal of difference in your financial life.
A Different Look at Debt
When you are borrowing money is the perfect time to think about whether you’re spending money in order to add value to your life. Most people aren’t aware that they are actually purchasing a product when they are borrowing money.
Think about it, you’re paying back the money which you borrowed PLUS interest. For example, if you take out a loan for five thousand dollars and end up paying it back in one year at 10% interest per year, you just bought that five thousand dollars for a total of $5,500.00. So is this money that you’re spending in order to add value to your life or not? It depends on what you purchase with that debt.
If you use it towards an investment which yields you a return of 12% or more, you’re adding value. However, anything less than that and the decision to make this “purchase” are causing value to flow away from you and towards someone else (the lender that is).
A Different Look at How You Spend Your Time
The concept of PowerSpending can also be related to how you invest your time. For example, if you spend one hour on the phone arguing with the phone company over a $5 charge on your phone bill, you just earned less than minimum wage. Is this something which is adding value to your life or taking it away? Or how about spending 10 hours a month taking care of your lawn when you could have paid someone $50 to take care of it for you? When you consider the money that you “save” by doing this work yourself, you’re only earning $5 an hour again.
In this case, it would be a wise move financially to spend your money on having someone else take care of your lawn, while you work on your plans for achieving financial freedom and for building wealth. So when it comes to spending your money or your time, ask yourself always whether you are spending to add value or to lose it.
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