The Only Three Money Principles You Need to Be Rich

• Houses are larger than they have ever been
• Over 35% of households have more than two vehicles
• Mobile phone and cable bills are in the hundreds of dollars per month
• Fuel costs are once again nearing an all time high

Our standard of living is increasing at an alarming rate.

In fact, according to Forbes, nearly 65% of Americans fail to save any money after paying their bills. And many are going further and further in debt every month.

I don’t have to break out a calculator to tell you that this is a recipe for financial disaster, especially if this is the behavior you exhibit from early on in your lifetime.

In order to become rich at any point in your life, you quite simply have to make more money than you pay out in bills and other expenses. Or to put it another way, you have a continuous positive cash flow.

(Read: Four Ways to Increase Your Income)

The easiest way to accomplish this is to think about 15% (or more) of your take home income as “hands off.” You save and invest this chunk of money, and you use the rest to pay your bills.

If you’re wondering what you’re going to do with this money, you’ll find out in a few paragraphs. For now, just keep this image in your head and keep your pants on.

This brings us to the next point, which is very closely related.

Pay Yourself First

So let’s say you do manage to get yourself into a positive cash flow situation. You’re making more money than you’re spending. That’s awesome.

Now I want you to make certain you establish the habit of “paying yourself first.”

Paying yourself first means before you do anything with your money each time you get paid – whether you have a steady income or a variable income – the first thing you do is take that 15% off the top.

This means if you’re bringing home $1000 every two weeks, toss $150 in an account that you don’t spend from. This is what you’re going to use to get rich. I’ll explain in a minute.

Now let the excuses roll in. I know what you’re thinking – “But Cody, that’s a lot of money. How am I going to buy my 80″ TV or the $2000 watch I’ve been eyeing?”

Don’t worry about that right now. How you’ll still be able to buy those things will make perfect sense once you understand the psychology of what happens when you do this.

After you’ve put that money aside (chill out, I’ll tell you what to do with it in a minute), you are allowed to pay your bills and spend on leisure.

If this sounds backwards to you, well, it is to most people as well, so don’t worry. The reason for this has everything to do with human behavior.

Simply put, people LOVE LOVE LOVE to spend money. It makes us temporarily happy (e.g. retail therapy – yes, this is actually a thing). The act of spending actually activates the pleasure center of the brain. It releases dopamine and makes you feel good, but only for a small period of time.

This means in order to keep feeling good, you have to keep spending and spending in a never-ending cycle.

Don’t get me wrong. There’s nothing wrong with spending money. In fact, denying yourself life’s simple pleasures like your morning coffee, or a drink after work is no way to live. That’s not what I’m suggesting.

What I am suggesting is that you establish this 15% safety net from the start (or more if you can) so you don’t have to worry about spending that chunk of money. This ensures you’re always putting money back for the future – even if you’re very undisciplined.

The interesting thing about this chunk of money is, you won’t miss it at all.

Yes, you will have slightly less money, but it’s such a small amount, you will adjust your lifestyle easily. And once you establish this habit, you’ll begin to understand that in order to afford the things you want, you’ll need to make more money – not spend every last dime you have.

This is a big difference between how the poor think, and how the rich think.

• The rich understand they must pay themselves first, and they compound their savings over time
• The poor pay others first, and they spend every last dime they have and are left with nothing

As you make this adjustment, you’ll spend a little less on routine expenses, be slightly more frugal, and buy less junk. In the end, you will not notice a difference at all.

The reward over time is a significant chunk of cash you can use to turn into a lot more money in the future.

Huge Tip: Make sure you automate this process so you never have to think about it. Take advantage of modern technology to use direct deposit and automatic transactions so you never have to worry about performing manual deposits.