How You Can Become a Money-Making Machine!

In previous blogs I have discussed the importance of setting goals (Check out the blog How to reach your goals faster). Yet are you wondering how you’ll ever make enough money to achieve them?

Well, this may surprise you…

You don’t have to have a huge income or win the lottery to make enough money to achieve your goals. You just need to be prepared to make your money work for you, by creating a money-making machine.

In this blog we are going to take a look at:

  • Why, and how, you should pay yourself first
  • How TJ, who never earned more than you his entire life, retired with $70m, and how he did it.
  • Einstein’s 8th wonder of the word

If you’re like I used to be, each pay cycle you tell yourself that this time you’ll put a good chunk of it away in the bank. But by the time you’ve paid for everything – rent, groceries, phone bill, morning coffee, gym membership – you’ve nothing left to save.

If you want to change your life and you don’t follow any other financial advice, at least do THIS!

The Pay-Yourself-First Strategy

The trick to wealth is not about what you earn, it’s about what you can hold onto. However, a simple tactic referred to as pay yourself first is achievable to everyone, if they want to do it. The strategy is that every payday, the very first thing you do is set aside a percentage of your income e.g. in a savings account. You do this before you pay the rent, before you pay your other bills, and before you celebrate with a beer. You “pay yourself first.”

Essentially what you are doing is putting your own long-term well-being ahead of almost every other financial responsibility you have. Getting into the habit of paying yourself first can be tough, but I’ll show you how paying yourself first and putting your savings on autopilot can produce powerful results.

Automate your savings

In a recent blog about the psychology of saving (check it out here), I covered five hacks to starting saving. A key one is to automate your savings. By taking away the temptation to spend money, and by putting your savings on auto-pilot, you don’t have to think about it. If you don’t see it, you don’t feel it. I suggested you pay yourself first by setting up a direct debit to transfer part of your pay into a savings account as soon as you get it. You can even ask your employer to do this for you. This way, you’re saving without even having to think about it.

It’s time to meet Theodore Johnson. Let’s call him TJ. TJ worked for a company where he never made more than $14,000 a year (this was a few years ago), in his whole 28 years of working for the company. TJ had a good friend who convinced him to “pay himself first” by setting up an automated transfer. This is how that conversation went.

“Listen, I’m going to put a 20% tax on you”. TJ initially protested “’I can’t do that, I only make $14,000 a year.” Luckily though our friend TJ was persuaded to direct 20% of his income into investments, and by the time he had retired TJ had accumulated $70 million!

How the heck did TJ achieve this?

Well TJ used two smart financial strategies. He first of paid himself first by saving 20% of his income, and those savings he invested to take advantage of the tool referred to as the 8th wonder of the world.

Ok, so by now you should have a good understanding of paying yourself first, and how best to do it. If you haven’t started saving yet, it’s ok to start small. This is where compound interest (which according to Einstein is the eighth wonder of the world), is your new best friend.

The Compound Interest Strategy

Now let’s take a look at making compound interest easy to understand.

Compound interest is interest on interest. You make an initial deposit (called the principal) into something like a savings account. You earn interest and it’s added to your deposit. Then, you start earning interest on both your initial deposit and the interest you’ve been paid. The cycle continues and this becomes an ongoing, compounding amount.

To help us understand more, let’s look at a real-life example.


Let’s use this investment strategy example from financial expert Burton Malkiel – he created the idea of index funds.

Take these twins, we’ll call them William and James. William started investing $4,000 annually at the age of 20 – and at age 40, he stops. His brother James invests $4,000 annually starting at age 40 – and at age 65, he stops. Now, imagine these brothers, currently 65 years old, are comparing their returns.

Based on this information, which brother has more money in his account at the age of retirement? William, who invested for 20 years, or James, who invested for 25 years? Can you guess?

The answer is… WILLIAM!

Were you correct?

By starting earlier and letting the money sit there to harness the power of compound interest William ends up with 600% more than James. Even though James invested for a longer time.

The end result is William has $2.5 million, and James – who saved all the way to 65 – has less than $400,000. That’s a gap of over $2 million!

The take home message is to start investing and taking advantage of compound interest as soon as possible – that’s how to become a money-making machine!


  1. Pick the percentage of your income you’re going to set aside automatically. There’s no right answer here, so trust your instincts. I suggest you have a spending plan (get in touch with us at Fix Bad Credit if you would like a template) to work out how much you can afford to pay yourself first whilst still being able to keep on top of your everyday costs of living.

From 5% to 50%, the amount you select is entirely up to you. Save as much as you can but you might want to start low and add an extra amount, like 1%, every month, until you are satisfied with your monthly savings goal. Review your spending plan regularly to see if you can identify more opportunities to save.

  1. Set up an account that your pay goes directly into. From there set up a transaction account, where the money allocated for your day-to-day spending and bills gets transferred into.
  2. Establish a high interest savings or investment account. Transfer the amount you have decided to invest into this account. Do not link this account with a debit card as you don’t want to make it easy for you to access this money.

If things that you are currently paying for come to an end, I suggest you keep making these payments but direct them into your investment account. For example, if you decide to quit your gym, which was costing you $100 each month, direct this amount straight into your investment account instead.

  1. Once you saved a bit of money now it’s time to make the most important investment decision of your life by reviewing and deciding on your investment buckets. To find out more about asset allocation when it comes to investment, check out this blog.
  1. Review your financial plan (check out the blog below for more information), making sure it’s accurate, and up to date.
  1. Have your choices of passive income streams in your buckets set up for your money machine to start making you money whilst you sleep. 24/7.

Note: The information in this article is general in nature as it has been prepared without taking account of your objectives, financial situation or needs.

B M Peachey

B M Peachey, has over 15 years of experience investing in property and the stock market, in both New Zealand and Australia. She has a post-graduate degree, with qualifications in Finance and Mortgage Broking and in Accounting and Bookkeeping. She is passionate about ensuring people have access to credible, reliable, and easy to understand information to help them get in control of the life they REALLY want to live.

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    Disclaimer: The information in this article is general in nature as it has been prepared without taking account of your specific objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstance before acting on it, and where appropriate, seek professional advice from a finance professional such as an adviser.