Build Wealth On Any Salary
Written by: Steve Repak
There are no secrets or short cuts to wealth building. If there was, don't you think they would be selling it on an infomercial for the low, low price of $19.95? Most people think that their next raise, refund check or an unexpected financial windfall will magically transform their finances. The truth is, it's not how much money you make but how you THINK about money that determines your ability to build wealth successfully. Many people don't think about money, they just spend it. Follow these four steps and start thinking about your money:
1. Spend Less Money Than You Make
People that are able to build wealth are able to spend less money than they make. The great part is that it doesn’t matter what you earn as long as you are spending less. If you earn $20k a year but only spend $18k you are better off than someone who earns $200k and spends $205k. To accumulate wealth you need to know where your money is going.
Tip: You can do this by keeping a spending diary. Start keeping receipts any time you spend money and record all of your expenditures in your diary at the end of the day. There are also a variety of smart phone applications that will help you track your expenses on the go. Once you know where it goes, you can start determining where to cut. The key to having more money is simply spending less of it.
2. Do Not Allow Your Emotions To Influence Your Financial Decision
When you spend money, your brain releases endorphins to the pleasure receptors in your brain. Have you ever heard of a runner’s high? The same principle is in action when you make purchases. For example, when people buy a new car they really like that new car smell. The bad part is that after a few months that new car smell starts to fade and you are left with 56 months of car payments. Those short term emotions will derail your long term success. To increase your wealth you need to resist that short term high you get from buying things and keep your eye on the long term prize which is financial security now and a comfortable retirement later.
Tip: To keep from making an emotional decision on a purchase, try asking yourself "if I lost my job tomorrow, would I need ________(fill in the blank)?"
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Your credit card company doesn’t love you. Neither does the electric company, your favorite department store or the car sitting in your driveway. Nobody loves you more than you do, so why aren’t you paying yourself before you pay anybody else? Your goal is to pay yourself at least 10% of what you make. Do not get hung up on whether this should be before taxes or after...pick one. Take your weekly salary and drop off the last number; this is how much you will pay into your "I love me" account. For example, if you take home $750 a week you will drop the 0 and now you know that you should be saving at least $75.
Tip: Once you have your number, set it up as an automatic bill payment just like you do with your other bills. Always make sure to pay yourself first!
4. Reduce Your Debt
People that are able to build wealth have little or no debt. Yes, believe it or not there are folks out there with NO debt! If you do have debt, the first step to reducing it is to stop charging. If those cards are burning a hole in your wallet, put them in a bowl of water and stick 'em in your freezer. Now if you get tempted to use your cards, you will have to wait until they thaw out. Next you will develop a "get out of debt" plan.
Tip: A great website to help you with this is www.powerpay.org. Keep in mind that just as you didn’t get INTO debt over night, neither will you get OUT of debt overnight. The key is to quit charging and put together a plan.
There's an old saying that "don't do today what you can put off until tomorrow". The problem with that is tomorrow is right around the corner and if you don't start changing the way you think about money you will find yourself broke and with few choices. There are no secrets or shortcuts to building wealth; the key revolves around priorities and planning. Where you spend your money is a sure way of identifying your priorities. Your spending diary will help you uncover yours. The next step is to plan, plan, plan. Plan to spend (wisely of course), plan to save, plan to make rational decisions with your money, and finally, plan to reduce your debt. Your financial situation will not get better by itself, but if you take these steps it WILL get better.
Steve Repak is a certified financial planner, Army veteran, motivational speaker, consultant and author of Dollars & Uncommon Sense: Basic Training For Your Money.
Six issues at the top of tax and finance leaders’ agenda
New Deloitte research reveals that tax leaders are under increasing pressure to add strategic value as companies accelerate business model transformation, from undergoing digital transformations to rethinking their supply chains or investing in green initiatives.
According to Phil Mills, Deloitte Global Tax & Legal Leader, to “truly deliver value to the business, the tax function needs to rethink its resourcing model and transform its technology infrastructure to create capacity and control costs”.
And the good news, according to Mills, is that tax and business leaders have more options at their disposal to achieve this.
Reflecting the insights of global tax and finance executives at global companies, Deloitte’s Tax Operations in Focus study reveals the six issues at the top of tax and finance leaders’ agenda.
Trend 1: Businesses seek more strategic counsel from tax
Companies are being pushed to develop new digital products and distribution channels and accelerate sustainable transformation and this is taking them into uncharted tax territory. Tax leaders say their teams must have the resources and skills to give deeper advisory support on digital business models (65%), supply chain restructuring (49%) and sustainability (48%) over the next two years. This means redrawing the boundaries of what tax professionals focus on, and accelerating adoption of advanced technologies and lower-cost resourcing models to meet compliance requirements and free up time.
According to Joanne Walker, Group Tax Director, BT Group PLC, "There’s still a heavy compliance load today, but the vision for the future would be that much of that falls away, and tax people become subject matter experts who help program the machine, ensure quality control, and redirect their time to advisory activity.”
Trend 2: Tipping point for resourcing models
Business partnering demands in the tax department are on the rise, but 93% of tax leaders say their department’s budget is remaining flat or falling. To ensure that the tax function can redefine itself as a strategic function at the pace that is required, leaders are choosing to move increasing amounts of compliance and reporting to a combination of shared service centers, finance departments, and outsourcing providers that have invested in best-in-class technology.
Trend 3: Digital tax administration is moving faster than expected
in addition to the rising focus of the corporate tax department partnering with their business counterparts, transformative changes to the way companies share tax information with revenue authorities is also creating an imperative to modernize operations at a faster pace. Nine in 10 (92%) respondents say that shifting revenue authority demands on digital tax administration will have a moderate or high impact on tax operations and resources over the next five years—and several heads of tax said the trend is moving faster than expected.
"It’s really stepped up in the last couple of years," says Anna Elphick, VP Tax, Unilever. "Tax authorities don't just want a faster turnaround for compliance but access into a company’s systems. It's not unreasonable to think that in a much shorter time than we expect, compliance will be about companies reviewing a return that's been drafted by the tax authorities."
Trend 4: Data simplification and lower-cost resourcing are top priorities
Tax leaders said that simplifying data management (53%) and moving to lower-cost resourcing models (51%) must be prioritized if tax is to become more proactive at delivering strategic insights to the business. Many tax teams are ensuring that they have a seat at the table as ERP systems are overhauled, which is paying dividends: 56% of those that have introduced NextGen ERP systems are now highly effective at supporting the business with scenario-modeling insights. Only 35% of those with moderate to low use of NextGen ERP systems said the same.
At Stryker, “we automated the source P&L process for transfer pricing which took a huge burden off of the divisions," says David Furgason, Vice President Tax. "Then we created a transfer price database to deposit and retrieve data so we have limited impact on the divisions. We are moving to a single ERP platform which will help us make take the next step with robotics.”
Trend 5: Skillsets are shifting
Embedding a new data infrastructure and redesigning processes are critical for the future tax vision. Tax leaders are aligned — data skills (45%) and technology process experience (43%) are ‘must have’ skills in a tax department of the future, but more traditional tax specialist knowledge also remains key (40%). The trick to success will be in tax leaders facilitating the way these professionals, with their different backgrounds, can work together collectively to unlock lasting value.
Take Infineon Technologies, which formed a VAT technology and governance group "that has the right knowledge about how to change the system to ensure it generates the right reports", according to Matthias Schubert, Global Head of Tax. "Involving them early was key as we took a greenfield approach, so we could think about what the optimal processes would look like and how more intelligent systems could make an impact
Trend 6: 2020 brought productivity improvements
Improved productivity (50%) and accelerating shifts to remote working (48%) were cited as the biggest operational benefits to emerge from COVID-19-driven disruption. But, as 78% of leaders now plan to embed either hybrid or fully remote models in the tax function long term, 34% say maintaining productivity benefits is a top concern. And, as leaders think about building their talent pipeline and strengthening advisory skill sets, 47% say they must prioritize new approaches to talent recognition and career development over the next two years, while 36% say new processes for involving tax in business strategy decisions must be established.