I’ve divided the Michael Principals into two parts, the Personal Laws and the Financial Laws. This is the first of the Financial Laws. Just like the first Personal Law it’s a very simple statement with profound meaning which is easy to grasp but harder to put in practice.
It’s not at first apparent how deep that statement is and as such it requires a little explaining. In the book there is a scribe who asks a money lender how to make money. The money lender responds by saying he found the road to making money when he learnt that a part of all he earned was his to keep.
The scribe responds with the question, “But, isn’t everything I earn mine?”
I think this is the mentality I had before I read the book, I earned the money hence I can spend it. It’s mine.
The money lender gave a different view which was a bit of an eye opener. You may earn the money but it’s not yours. By using it you are actually giving it to the people who give you services in return. At the end of the day all the money is gone and you have kept none of it. You may be wondering ‘if I got services for money isn’t it well spent?’ Yes it is, but it’s still gone, you no longer have money. Think about it, how much money have you made over the last couple of years? How much do you still have?
It’s not how much money you make but how much you keep.
The rule isn’t saying a part of your money is yours to spend, it’s saying to it’s yours to keep and that distinction makes all the difference. The book recommends that at least 10% of everything you earn should not leave your wallet, bank account, mattress, etc and the result of doing this, of course, is that every time you receive money you save at least 10% and when you do this consistently for a long enough period of time you will have a nice little fortune on your hands.
Here is where it gets funky, the trick is not to keep that money idle but to invest it. It does not have to be one of those investments with huge returns but it has to return something while protecting the principal. The returns of those investments go back into that account and are invested further. If you do this correctly even at low returns, that account will grow rapidly and soon you will have a lot of money at your disposal.
I love the following quote:
Money goes where it’s wanted, and stays where it’s treated well.
I’ve been mistreating my money ever since I started working and as a result it has always left me. I think I will start treating it well for a change because I really want to keep it. The basic rules about how and when to invest are covered in other rules for other posts, so for now I’m just going to treat my money a little better and start keeping a part of all I earn.