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The Difference Between A Pay Raise & Self Reliance

Look, some people reading this will hate what we are about to say but we've found that it's always best to share what you feel needs to be shared.

Here it is:

You can't depend on other people for your financial well being.  Not the company you work for, not the Conservatives or the Liberals.

A story for you...

A good friend got a promotion a while back and couldn't hold back his delight.  We could understand, we used to be the same way.

But then something hit us in the head one day and we realized that if you get a raise your standard of living likely increases along with that raise.

No matter how many books about saving you have read, you'll likely go out a buy that new cell phone with the larger data package or that 52" 3D TV you've been dreaming about since you saw it at your friend's house.

Maybe you even book a little vacation to Cuba and for you Americans reading this...maybe it's the Bahamas 😉

So you end up spending more money.

Guess what?

You are MORE dependent on your income than you were before.

Your raise has increased your dependence on your income.  Not decreased it.

Your raise has chained you even more closely to your job.  The shackles grow stronger.

With the family to support and the mortgage on the house, you feel locked in.  No options.

And then if the financial markets hit some tough times your company sponsored RRSP plan may not look as promising as it once did.

Look, you need to take control of your own financial future.

If you're looking to start this process, and it really is a process, here are some ideas to think about:

1. You must read biographies of people who have accomplished what you want to accomplish. They are the most revealing and most instructive because they give you direct insight into the thought processes and decision making used.  Start with people like Richard Branson or Warren Buffet or Ted Rogers (Rogers Wireless).

2. If you are at the stage that you really need some motivation then spend a few months on goal setting and reading.  Although Robert Kiyosaki's books get a lot of flack for not being detailed enough they are great for thinking big.  Start with Rich Dad, Poor Dad and make sure you read his book titled, Cashflow Quadrant.  Don't spend more than six months on goal setting. Anything longer is a waste of time.

3. Instead of using newspaper articles to make your opinions read the reports that the articles are based on.  For example, you can read reports directly from top economists at every bank's website.  Click here to see TD's weekly bottom line (click Weekly Bottom Line on the right-hand side).

4. Find a local mentor.  Start asking friends and family for the names of people who have already done what you want to do.  Go to the source.  A few words of advice from such people can shave off years from your learning curve.

5. Do the "Plank Test".  We stumbled upon this a while back.  If a thin board was placed between two skyscrapers you may hesitate before you try and cross it.  But if there was a burning fire screaming towards you - how quickly would you get your butt across that board?   What is your burning fire?  You need it.  You need deadlines with it.

6.  Consistent action.  Someone once told us that consistency is the key to everything.  If you decide to be responsible for your own financial future then you need to take consistent action on it.  A little action here and then nothing for a few months amounts to nothing.

7.  Strongly consider becoming an "active" investor.  Instead of handing over your money to a mutual fund manager take responsibility for yourself.  Buy things directly that you actively manage.  It's more work of course, but it puts you in the driver's seat.

This is self-serving because many of you know we are fans of positive cash flow properties.  So take this advice and ask around a little....has anyone made any real wealth by blindly putting their money in someone else's hands?

Seriously, ask everyone you know this question.  Our money says that everyone who has some serious financial independence started their own business or invested in assets that they actively managed.

8. Work on "future value" instead of "now value".  Some percentage of your daily activities should involve creating some future wealth for yourself.  Going to work and getting paid creates "now value" but what are you doing today to produce income for yourself 20 years from now?  Or will you be doing then what you are doing now?

9. Stay away from the day-to-day headlines and focus on the long term.  Build a plan for yourself that goes out 10 years or more.  With a longer-term perspective in place the "big issue of the day" doesn't seem so intimidating.

10.  Always remember that good people are more important than any "deal" or "hot tip".  Surround yourself with a solid group of people.  It takes time to create your own dream team of experts but the payoffs are huge.

Becoming comfortable with controlling your own financial future is a process.  Just like anything else.  You get started with one step followed by another.  Which step are you taking today?

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