Lower Your Burn Rate

Wealth Accumulation Driver #1: Lower Your Burn Rate (How to Save Money Like A First Generation Millionaire)

At Millionaire Foundry, we believe there are four key drivers to accumulating wealth.

The first we call Lower Your Burn Rate.

Cavemen burned wood to survive, our civilization ‘burns’ cash.

To sustain you and your family, you must use some portion of your income to acquire the basic things for survival in today’s world including food, shelter, clothing, transportation, and other life necessities.

We call this spending your Burn Rate.

Once you spend money on things that don’t produce income, even if it is smart and necessary spending, it’s like you lit a match and burned your cash — it’s gone forever.

It can no longer help you fuel your mission to get rich.

If you’re early in your wealth journey, initial wealth can only be created by spending less than your income, there’s simply no other way.

Companies generate profits only when their revenues or sales exceed their total spending, and the same holds for us.

Therefore, the quest to Lower Your Burn Rate has to be your first and most urgent mission.

Why?

The quickest path to creating initial wealth is to generate as much take home income as possible, while keeping your Burn Rate as low as possible.

Income can rise over time, and we’ll address how to accelerate it when we cover the second wealth driver, Maximize the Value of You.

But reducing your Burn Rate creates investible cash the minute you save money by cutting your expenses.

Reducing your expenses increases the cash you keep, which we call your Personal Profit. This then can be invested to generate even more cash.

But if there’s $0 Personal Profit left at the end of your month, you forever lose the precious dollars that are the cement of your wealth foundation. You also lose their lifetime power to expand that foundation with the dollars your investments can throw off 24/7.

Saving a single dollar seems trivial, but it actually has incredible power.

Using a 30-year horizon and a reasonable 7% return on a 401k account, every $1 saved today grows $7.61 thanks to the incredible power of compound interest.

Any employer match makes it even sweeter.

And, of course, the wealth math gets far more interesting with larger numbers.

For some families it’s not unrealistic to cut their weekly spending by $100. Do it for only a single year and it grows to $39,584 in 30 years.

Make that $100 a week cut permanent and, in 30 years, you’ll have an astounding $531,734!

We consider Lower Your Burn Rate the cornerstone to personal wealth creation.

Why?

From my experience as self-made, First Generation Millionaire, I can assure you that if you do not master this first wealth driver you will never build lasting wealth.

It’s that serious.

If you don’t have the ability to control your Burn Rate, at least to the extent that your income and expenses are balanced, you will not have the Personal Profit required to begin building wealth.

When your Burn Rate equals your income, regardless of how much your take home income is, you’ll be doomed to an infinite cycle of living paycheck-to-paycheck.

Even worse, if you borrow money that allows you to temporarily consume more than your income, you’ll be trapped into endless debt repayment for things and experiences that are only distant memories.

The reality is that if you are unable to get your Burn Rate under control for the long run, you will fail in your attempt to create AND retain wealth.

Conversely, if you get this right and do nothing more than dump your excess cash into 5-year FDIC-insured bank CDs, you are guaranteed to build at least some level of wealth.

The great news is that mastering how to save money is a simple concept where if you do the things we suggest – and many that you’ll think of on your own – you are certain to see immediate results.

It’s easy to get turned off by the topic of Burn Rate because people who carefully manage theirs are often labeled — typically by those who don’t — as frugal, cheap, or miserly.

While we all know someone who can be fairly described by those labels, wealth builders who have their spending aligned with their income and financial goals are simply money savvy.

They attempt to extract the maximum value from their spending because they understand that once a dollar is ‘burned’, it forever loses its ability to create future wealth.

In mastering our Burn Rate, we have to overcome the messaging that encourages us to spend now, because we deserve whatever item or service is being promoted.

Much of this marketing is to convince us to buy things we probably don’t need, or at least not immediately.

If we do enough of this non-essential spending, our Burn Rate can spiral out of control.

And then our lifestyle becomes bigger than our income.

Before we know it, our financial future has been destroyed.

I once heard a quote that rings true: “If your upkeep exceeds your income, it will lead to your downfall.”

Today’s consumer credit – including credit cards, pay later plans, 0% financing, home equity loans, and pay day loans — can delay the timing of that downfall, but make no mistake, for those who persistently live beyond their means, the downfall will eventually come.

The longer one lives beyond their means, the bigger the debt, and the more painful the downfall.

This sometimes even ends in bankruptcy, which carries not just a long-lasting financial toll, but an emotional one as well.

At Millionaire Foundry, in the coming months, we will give you new ways to look at how to Save Money.

Many of these tips and insights will come from my firsthand experience of growing up in the struggling segment of the middle class, and watching my parents create their magic in making ends meet.

Their challenges were on the income generation side, so they taught me the value of controlling my Burn Rate as a way to consistently live within my means, and aggressively avoid debt and the potential financial destruction that comes with it.

I believe that if you grew up like me, where your family struggled just to cover the basics of survival, you’re at a huge advantage in building wealth, especially if your spending is already lower than your income.

Why?

You’ve already learned how to live on less and, as your income rises, you can build your wealth very quickly, provided you don’t increase your Burn Rate as fast as your income.

You’ve also likely learned how to make difficult choices on setting financial priorities, and separating wants from needs. After all, you had no choice.

And you know that your world won’t collapse if you don’t have the latest electronics, cars or clothes.

You already understand that your brighter financial future is far more important than any discretionary item.

These are all valuable perspectives in building meaningful wealth. Make sure to fully leverage these powerful advantages.

When determining how to Lower Your Burn Rate, there’s no question the B word – yes, a budget – is part of the process.

But a budget just doesn’t have to be just about numbers and sacrifices.

Budgeting can be a powerful process that makes you think through how you are spending your hard-earned cash, and if that spending is in line with your immediate priorities, as well as the financial future you deserve.

Most people already realize that some sort of budget is necessary to run their financial lives. So why don’t some take that first step with even a rudimentary budget?

From those I’ve coached, the answers I’ve heard in avoiding the ‘B’ word include: “It’s too daunting, I’ll do it next year when…, I don’t want to upset my significant other, I’m afraid of what I’ll find, My kids deserve this or that, I don’t make enough to think about it, The budgeting tools are too difficult.”

If any of these sound familiar it’s not your fault.

It’s just that you probably haven’t had a compelling enough reason to overcome what’s holding you back from taking that important first step.

But by visiting Millionaire Foundry, you’ve already joined an elite group who cares about creating their brighter financial future. The one they know that deep down they deserve.

The 4 reasons I can give you to take action in order to master how to save money today is that every day you don’t take action you will:

1. Lose out on saving your cash from being burned to ashes, cash that can start building your wealth foundation today.

2. Lose out on the compound interest that a dollar saved today can generate for the rest of your life.

3. Miss out on the deep peace of mind that comes from both getting your finances under control, and knowing that you have a realistic plan – not just hope – that you’ll eventually become financially secure or maybe even reach your Financial Independence Day.

4.  Lose the opportunity to demonstrate to your significant other, kids, or friends how to successfully manage finances.

If you don’t take action today, you risk waking up 1, 2 or 5 years from now being stuck in the same spot you are today. Don’t you deserve better?

The great news is that once you master your Burn Rate, it will become second nature to keep your spending and income in balance.

Then you can turn your attention to the leveraging the other three wealth drivers.

Lowering Your Burn Rate is a step you can take this very minute, and you will gain immediate benefits that last a lifetime.

Even if you say no to every other idea at Millionaire Foundry, if you are at least willing to master how to save money like A First Generation Millionaire, you’ll be headed in the right direction.

Claim your brighter financial future now. We look forward to seeing you around here at Millionaire Foundry.

Wealth is Freedom!

A First Generation Millionaire