The Four Masteries of Money, part two (#682)

(If you missed part one, you can read it here.)

Last week, I shared some ideas on how to begin creating more money as and when you need it – and indeed, whenever I teach the four masteries of money that is the skill that people seem most interested in learning. Yet I have always found it curious that most people in the United States will earn over a million dollars in their lifetime and still somehow manage to retire in debt or with less than $50,000 in assets.

Why is that?
Because they never got around to developing the next mastery of money…

The Second Mastery:
Accumulating Money

My 14 year old son Oliver has already begun to master the art of creating money. He looks for additional ways to help out around the house and in my business, and makes proposals based on the positive difference he can make in our lives.

Which is why it drives him crazy that his younger sister Clara always seems to have three or four times as much money as him just sitting around in her room. (In fact, if we ever need someone to loan us lunch money for school we know exactly where to turn!)

This is not because she is any more skilled at creating money than him; quite the contrary. It is because she seems to take more pleasure in accumulating a surplus of money than she does in spending it.

Why (based on their current patterns of spending and saving) is Clara more likely to wind up with more money than Oliver, despite his greater facility at earning?

Because the more money you have accumulated, the less likely you are to get caught up on the emotional rollercoaster of fear, greed, lack, or neediness. This emotional stability in turn makes you far more likely to make smart financial decisions going forward. In addition, your accumulated financial “cushion” will provide you with the funds to put into developing your business, product, investments or services.

While any pattern of spending or saving can become a problem when taken to an extreme, there is a simple balance to be struck between the two that will enable you to create a plump financial cushion without having to scrimp and sacrifice your way to success.

Here are a couple of simple systems you can use to begin accumulating money beginning this week, regardless of your current level of income…

1. Pay yourself first

One of the most oft repeated phrases I came across when I first became interested in mastering money in my life was this:

A portion of all you earn is yours to keep.
While a decade or so passed before I actually began to heed this particular bit of financial wisdom, there are two ways of doing this I have experimented with for myself and my clients over the past several years to good effect:

a. 10-10-80

In The Richest Man in Babylon, author George S. Clason proposes that a formula for wealth is to take the first 10% of everything you earn and put it into some form of long-term savings or investment fund. The second 10% is to be given away in the form of a gift or a tithe; the remaining 80% is then available to pay bills, buy stuff, and generally enjoy your life.

While it may seem impossible to put aside the first 10% of a paycheck that barely even covers your current expenses, I know from personal experience that the moment saving that first 10% becomes a true priority, the money to pay for everything else has a way of showing up when you least expect it.

b. The F.A.S.T. system

I was first introduced to this variation on “the first 10%” in a book by John F. Demartini entitled How to Make a Hell of a Profit and Still Get to Heaven and used it as my primary method of accumulation for several years. Simply put, DeMartini suggests setting an amount of money that you will have automatically deducted from your checking account each month and then increasing that amount by 10% every three months.

For example, if you began by saving $100 a month in January, in April that would go up to $110; in July to $121; and in October to $133. If that seems to small a jump to make much of a difference, think about this: if you began this program in January, 2010, within five years you would be effortlessly saving over $600 a month and would have accumulated over $17,000 before adding compound interest, which Albert Einstein called “the eighth wonder of the world”.

2. Financial Reservoir

This was the very first system I developed for accumulating extra money, and I have been using and teaching it to great effect over the past 20 years. (Members of the Solutions Cafe can read about this system in more detail in two tips – “Cash Flow Management for the Self-Employed” and “The Freedom Fund“).

In a nutshell, your financial reservoir is some form of instant access savings account into which you deposit all of your income as directly as possible until it contains an accumulated sum of money equal to 6 to 12 months of your average monthly income. This then allows you the freedom to use your income to top up your reservoir while the money in the reservoir funds your lifestyle.

Most people are surprised at how quickly their financial reservoir fills up when they simply change the order in which the money comes in.

Instead of this:

Income –> Spending –> Reservoir (Saving)
you begin to do this:

Income -> Reservoir –> Spending
One of the reasons this works so well is that it taps into some fundamental human psychology.

Let’s face it – would you rather have money taken away from you each month “for your own good,” or to get to decide each time you’re thinking about spending money on something how much extra you want to keep?


(Adapted with permission from the book I Can Make You Rich by Paul McKenna)

1. Make a list of 50 things you would love to do, be or have in your life if only you had more money in the bank. Examples:

  • Drive a nicer car
  • Take more vacation time
  • Learn to fly a plane
  • Get a second home

2. Now, make a list of 50 ways that having more money in the bank would help you achieve your highest values.


  • I could spend more time with my family
  • I’d be able to contribute to my church or favorite charity
  • I’d be less stressed, which would make me healthier and happier

3. If you’re ready to commit to mastering the accumulation of money, begin implementing one of the above accumulation strategies into your life over the next week.

Have fun, learn heaps, and enjoy creating your cushion!


Related Articles

The Four Masteries of Money, part four (#684)

Managing your money is perhaps the most practical of the money masteries, and many of the basics of financial literacy can be easily learned online or over a coffee and donut at your local bookshop. (Just be sure not to get any donut crumbs on the books if you’re not planning on buying them later… 🙂