In The Wealthy Barber, David Chilton suggests a solution to building our wealth. He calls it the Ten Percent Solution. The concept is actually quite simple. Invest ten percent of all you make for long-term growth and you'll wake up one day very wealthy.
Most people of course react to this with sceptism. The biggest objection, is being able to afford to put 10% away. If that money come right off our pay cheques though I'm pretty sure most of us wouldn't even notice. I remember once when I receieved a fairly nice raise of 5% and I couldn't tell you how my spending changed at all. It doesn't take long for the money to be used up. The opposite is equally as true. If we took a 10% pay cut, most of use wouldn't even notice (except for the bad attitude at work).
This isn't in lieu of your retirement planning either. He's actually suggesting this on top of any retirement planning you have. Your retirement plan is to enable you to stop working, while the ten percent fund is to enable you to have more fun while not working. Trips you wouldn't otherwise take, a boat you wouldn't otherwise buy, etc.
Seeing as I don't like talking about things I'm not doing myself, you're probably wondering how its going for me. Well, truth be told, it's not. The problem with this concept is that Chilton doesn't tell you what to do when you're in debt other than to stop using credit cards. Obviously none of us want to be in debt (or stay there very long), so it's my goal to get out of debt as quickly as possible. So to do that I've been using the ten percent solution to pay off my debts. Once my wife starts working, the debt repayment should speed up nicely. The plan is to also start putting money away for retirement once again after she starts working.
Once the debt is paid off I can continue on with the payments to build wealth. I did run into a little snag with this plan though which I'll touch on more next post.
Anyone already doing this? Any success or failure stories? Do you think Chilton and I are crazy?