WEALTHY people think and manage their money differently than poor people. The good news is managing money well is a learnable skill that you too can learn, If you want to be rich, follow these 10 principles and you’ll soon be on your way to success. Here’s how:
1. Forget instant gratification
Instant gratification is the road to poverty. Most people are wired for instant gratification. They love it. But evolution made them that way long before our modern monetary system came about. The desire for instant gratification doesn’t help when we’re trying to become wealthy; it hurts us.
Stop making decisions that will make you happy for a moment, but messes up your future wealth.
2. Needs vs wants
Wealthy people understand the difference between needs and wants. A common mistake poor people make is to disguise wants as needs to justify their expensive purchases. “We need a bigger house,” they may say, to feel better after making a poor financial choice. Don’t fall into this trap, and know the difference between a want and a need. The bottom line is to spend less than you earn.
3. Invest automatically
There are ways to automate investment, such as payroll deduction to a retirement account. Even more important is the mentality of investing. Automatic or not, wealthy people believe strongly in investing and they do it as habitually as brushing teeth.
Roy Sheppard, millionaire, and finance expert said: “Save 15% of everything you ever earn for the rest of your life.”
There’s no question about how much the rich should invest. They know the importance of putting their money aside for investment, to achieve their financial goals.
4. The cost of debt
For example, when it comes to buying a car, poor people make poor choices by asking the wrong questions: “What are the monthly installments?” A better question would be: “What is this car really going to cost me?” When you multiply the monthly payment by the number of months the loan will cost you, you’ll be shocked to discover that the total sum is way more expensive than the cost of the car itself — and that’s before depreciation, taxes, and other expenses. Bottom line, this is the number you have to be aware of, before making your purchasing decision.
5. Begin with the End in Mind
Know what you want and what it’s going to take to get it. If you don’t know what you want, it doesn’t really matter. Josh Simon, a 28-year-old real estate millionaire, said: “Figure out how you want to live in retirement, come up with a number and then work towards realizing your goal.”
Decide what you want your life to be, figure out how much that will cost you, and do exactly what you need to do, to get there.
6. Live within your means
The greatest thing about investing automatically is that it takes care of this one. If you start investing early, you will reach your financial goals faster, and use the remaining time to do what you love. Start saving money, and make that your priority, so you won’t end up spending more than you can afford to. The most important thing is to spend less than you make.
7. Make short-term sacrifices
Think bigger than what you want right now. Think about the future effect of your decisions and how they may impact your life. The point of being wealthy is to have more of what you want in the future, but it comes with a simple trade-off, to make small sacrifices now so that you can enjoy a better life in the future.
8. Get help
Millionaire entrepreneur Vladimir Gendelman said, “I know how to build and grow businesses, but I leave my money management to the professionals.” Yes, know what you are good at and leave the heavy-lifting to the professionals.
Focus on the unique values that you bring to the table so that you can earn more money and invest the rest.
9. Do the maths
Wealthy people run the numbers when they make a decision. For example, do you need to buy a new car when you can maintain or repair it? Contrary to popular belief, a new car will save you the cost of repair, and avoiding the cost of a depreciating asset can save you a big fortune in the future. Just do the maths.
10. Grab the opportunity
When an opportunity arises, take full advantage of it. See the long-term value and benefits it may bring to your life. Don’t be clueless about managing money. Understand the basics well enough to get you started on the right path. And keep on learning…. because good knowledge is freely available nowadays
Start by making some short-term sacrifices, so that you too may attain a life of financial freedom through your investments.
Though the journey may be long, it is better to start now, to enjoy a lasting reward. And have fun doing it.