The Wedge Theory: How does it work?
Yesterday I was having a good time with my friends and business partners. We were celebrating and having fun.
Meanwhile we were discussing different business issues. One of my friends asked us a question: how to start working on her financial freedom and start saving money when she does not have enough money to save? Here is how “Wedge Theory” works.
When you ask a person to save a certain amount out of their current income, they will almost always agree that it is a good idea, but they will also claim that it is not possible.
To save out of your current income will mean reducing your standard of living. It may mean moving to a smaller place, driving a smaller car, eating cheaper foods, or not going out as often.
Since human beings are creatures of habit, even if they can mentally agree that
saving is a good idea, the actual reduction in living standards that it requires is so
unacceptable that they are not able to discipline themselves to take the first step.
In wedge theory, it is different. Instead of cutting back on your current lifestyle,
you resolve to save 50% of every increase you receive from your work from this
day forward. This is something you can do because you don’t yet have the money
built into your daily way of life.
It is much easier for people to commit to saving money that they have not yet received than it is to get people to agree to save money by cutting back on their current standard of living.
By practicing some of the other techniques and methods taught later on in this book, you will be able to increase your income by 5%, 10% and even 25% per year. To become wealthy, you must develop the habit, starting today, of saving fully 50% of these future increases.
You can still spend the other 50% on whatever you like, but you must agree to save half of the money that you don’t even have yet.
This should not be hard for you.
Depending upon your age, and the rate at which your income grows, by saving
50% of your increases in the years ahead, you will soon acquire an enormous
amount of money.
And the more money you acquire, the more money you will attract to yourself. By disciplining yourself and developing the habit of saving half of your increase for the rest of your career, you will pay off all your debts, build an enormous financial fortress and eventually become financially independent.
I’d love to hear from you, in the comments below.
Please, tell me your way of getting rich? Did you start with savings first?
When did you start to work on your financial freedom?
Thank you, for contributing so generously here!
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