Unlocking Financial Freedom: The New Money Approach to Smart Spending

The Four Ways to Buy Anything

When it comes to making purchases, there are typically four main methods people use:

1. Past Money (Savings): This is money you've earned in the past and set aside.
2. Income Money: The money you earn each month that can be spent without touching savings.
3. Debt Money: Borrowing against future earnings, which will need to be repaid.
4. New Money: A unique approach that involves creating additional income specifically for a purchase.

Understanding the 'New Money' Concept

The 'new money' approach is a strategy often employed by wealthy individuals who are comfortable making significant purchases. Instead of using existing resources, they create new income streams to fund their desires. This method allows them to maintain their current financial status while still acquiring the things they want.

The Power of New Money: A Real-Life Example

Let's consider a business owner faced with choosing between two office spaces - a sensible option and a much larger, more exciting one. The larger office was 2.5 times the price but also the one the owner truly wanted. The advice given? Go for the bigger office, but with one condition: pay it off within a year.

This scenario illustrates the essence of the 'new money' approach. It's not about whether you can afford something based on your current financial situation, but rather about your ability to generate new income to cover the cost.

The Psychology Behind New Money

The 'new money' concept isn't just about financial strategy; it's also about mindset. When you decide to create new income for a specific purchase, you're more likely to follow through because:

1. You've created a clear goal
2. You've set a defined timeframe
3. You're motivated by the end result

This approach shifts your thinking from "Can I afford this?" to "How can I make this happen?"

Practical Applications of the New Money Approach

1. Real Estate Investments

When purchasing a large property, like a 36,000 sq ft building, instead of relying on existing income or savings, consider how you can use the property to generate its own income. For example, you could:

• Rent out portions of the space
• Use it to host events
• Create a co-working space

2. Personal Luxuries

If you want to buy a boat or a car, instead of dipping into your savings, consider:

• Working one extra day per week for a year
• Taking on additional freelance work
• Starting a side business

3. Fitness Goals

A gym membership might seem like a luxury, but it can be achieved through the 'new money' approach. For instance, driving for a ride-sharing service one day a week could cover the cost.

The 'Write Yourself a Swimming Pool' Principle

This concept is beautifully illustrated by the story of Paul McCartney. When he wanted a swimming pool, instead of using his existing wealth, he decided to write a new song to fund it. This principle can be applied to various aspects of life:

• Want a new guitar? Write and sell a song.
• Need a new computer? Offer tech support services.
• Desire a luxury vacation? Create and sell an online course.

Benefits of the New Money Approach

1. Maintains Financial Stability: By not touching your existing income or savings, you preserve your financial foundation.

2. Reduces Financial Stress: Knowing that a purchase is funded by new income can alleviate guilt or worry associated with spending.

3. Encourages Creativity: This approach pushes you to think outside the box and find innovative ways to generate income.

4. Builds New Skills: In the process of earning 'new money', you might develop valuable skills or discover new passions.

5. Increases Appreciation: When you work specifically for something, you tend to value it more.

Implementing the New Money Strategy

Step 1: Identify Your Desire

Clearly define what you want to purchase. Be specific about the item and its cost.

Step 2: Assess Your Resources

Look at your current assets, skills, and time. What can you leverage to create new income?

Step 3: Create a Plan

Develop a strategy for generating the required funds. Set clear goals and timelines.

Step 4: Execute and Monitor

Put your plan into action and track your progress. Adjust as necessary.

Step 5: Make the Purchase

Once you've reached your goal, buy the item knowing you've earned it through your additional efforts.

When to Use the New Money Approach

This strategy is particularly useful for:

1. Large, non-essential purchases
2. Luxury items or experiences
3. Business expansions or improvements
4. Personal development investments

It's important to note that this approach is not suitable for essential expenses or when you're struggling financially. It's a tool for those who have their basic needs covered and are looking to make additional purchases without compromising their financial stability.

The Psychological Impact of New Money

Using the 'new money' approach can have significant psychological benefits:

1. Increased Motivation: When you tie a specific goal to your extra work, it can be more motivating than your regular income.

2. Reduced Guilt: By not touching your main income or savings, you can enjoy your purchase without feeling guilty.

3. Sense of Achievement: Earning something through additional effort can provide a greater sense of accomplishment.

4. Improved Financial Discipline: This approach encourages you to think critically about your purchases and how to fund them.

Balancing New Money with Financial Responsibility

While the 'new money' approach can be powerful, it's crucial to maintain overall financial responsibility:

1. Don't Neglect Savings: Continue to save and invest for your future while pursuing 'new money' projects.

2. Avoid Burnout: Be careful not to overwork yourself in pursuit of new purchases.

3. Prioritize Wisely: Use this approach for things that truly matter to you, not for every whim.

4. Maintain a Budget: Keep your regular expenses in check and use 'new money' for extras, not essentials.

Case Studies: Success with New Money

The Home Gym Entrepreneur

An entrepreneur wanted a high-end home gym but didn't want to use his business profits or savings. Instead, he started offering advisory services, using the income from this new venture to fund his gym equipment purchases.

The Single Mom's Fitness Journey

A single mother of four wanted a gym membership but couldn't afford it with her regular income. She decided to drive for a ride-sharing service one day a week to cover the cost. This not only allowed her to join the gym but also led to significant health improvements.

The Musician's Studio Upgrade

A local musician wanted to upgrade his home studio but didn't want to dip into his gig money. He started offering online music lessons, using the income to gradually purchase new equipment.

Adapting the New Money Approach for Different Financial Situations

For Those Just Starting Out

If you're early in your career or have limited resources:

• Focus on small, achievable goals
• Use skills you already have to generate extra income
• Consider time-based services like tutoring or freelancing

For Mid-Career Professionals

If you're established in your career but want to make larger purchases:

• Look for opportunities to consult in your field
• Consider creating and selling online courses related to your expertise
• Explore passive income opportunities like rental properties or dividend stocks

For Business Owners

If you run your own business:

• Develop new product lines or services specifically to fund your purchase
• Use your business network to find new opportunities for income
• Consider strategic partnerships that can generate additional revenue

Potential Pitfalls and How to Avoid Them

1. Overextending Yourself: Be realistic about how much extra work you can take on without burning out.

2. Neglecting Long-Term Financial Goals: Don't let short-term desires derail your long-term financial plans.

3. Justifying Unnecessary Purchases: Be honest with yourself about whether you really need or want the item.

4. Ignoring Tax Implications: Remember that new income sources may have tax consequences. Plan accordingly.

Integrating New Money into Your Financial Philosophy

The 'new money' approach isn't just about making purchases; it can be a fundamental shift in how you view money and wealth creation:

1. Abundance Mindset: It encourages you to see opportunities for income generation everywhere.

2. Value-Based Spending: By working specifically for what you want, you ensure that your purchases align with your values.

3. Continuous Growth: The process of earning 'new money' often leads to personal and professional development.

4. Financial Creativity: It pushes you to think creatively about money, which can lead to innovative financial strategies in other areas of your life.

Conclusion

The 'new money' approach offers a fresh perspective on making significant purchases without compromising your financial stability. By creating new income streams for specific goals, you can enjoy life's luxuries while maintaining fiscal responsibility. This method not only helps you acquire the things you want but also promotes personal growth, creativity, and a healthier relationship with money.

Remember, the key is to use this strategy wisely, balancing your desires with your overall financial health. Whether you're saving for a dream vacation, investing in your business, or treating yourself to a luxury item, the 'new money' approach can help you achieve your goals while keeping your financial foundation strong.

By adopting this mindset, you're not just buying things; you're investing in experiences, growth, and a more fulfilling life. So the next time you find yourself wanting something that seems just out of reach, ask yourself: "How can I create new money to make this happen?" The answer might just lead you to your next big achievement.

Article created from: https://www.youtube.com/watch?v=by3ZEoo-Quc