This is the second in a series of three posts I am writing that explore the unexamined ideals about money. Part 1 covered the middle class and not spending your future earnings in a search for happiness.
Today, I am going to talk about the differences between the money mindset of an average person and a wealthy person. Your relationship with money can be as complicated as your relationship with a person. It will define your life, whether you like it or not. It can give you security or cause you to teeter toward destruction.
Rich People’s Secret Affair
I’ll let you in on a little secret. At one point wealthy people, or someone in their family, were just like you. They were toiling away at a job, day in and day out. At some point, the rich people took a different fork in the road and decided to keep their money. They saved and worked, worked and saved. They did other things, too, such as invested the money they kept so it worked for them making even more money, but the point is they did not spend everything they made. This might have taken decades or just years, but regardless, rich people like to keep the majority of their money, at least they should if they want to stay rich.
Being rich isn’t about spending; it is about keeping. Anyone can do it, at least to some extent. You might not be able to spend like the rich, you might not be able to earn like the rich, but you can save like them. Even if it isn’t much at first, you can still save something. Start somewhere.
It’s worth mentioning that you often see athletes and celebrities out spending money on ridiculous parties, yachts and mansions. What you don’t see is that many of them end up broke. Don’t model your life after theirs.
Two Ways to Think About Salary
When the average person gets a job, he or she looks at the new salary and thinks, “Great, this is how much I can spend.” They go to a real estate broker, who looks at their salary and says, “Great, this is how much you can borrow.” They subtract their new house payment from their salary, plus a few more necessary expenses and the difference is the amount they can pay towards a new car. So they march down to the dealership and buy a car that uses up the entire payment, if not over a smidgen.
Now, their budget it balanced. No room for savings, but that’s okay. They can charge any emergencies that come up to their credit card and as they get raises they can save at that point. They get their first raise. Saving it crosses their mind, briefly, but then they realize they haven’t had a vacation in a while. Or they are jealous of their friend’s housekeeper. And so on…you get the picture.
Now an alternative attitude toward the same salary…
You look at your new salary and think, “Okay, I am trading my life for this amount of money, what is the best way to use it?” First you plan a decent amount to save. You’ve done your homework and you know that 10% is the bare minimum, but who wants to do the bare minimum? You decide on 20%. You need a place to live, so you research and examine all of the expenses in your life and decide that you are willing to borrow an amount that puts your house payment at around 30% max. You keep driving your current car and stock away money towards buying a new one when this one is no longer reliable. New raises provide more opportunity to save for rainy days, retirement and other big things like vacations. None of your salary is spent on credit card interest or penalties, since those are wasted expenses. You remember that working is trading bits of your life for money, so why waste those bits on interest?
I am sure you can see the difference in those two mindsets. One is reactive and reckless and the other is deliberate and planned. Which one do you think will lead to a more secure and lucrative future?
What if You Were Rich?
Imagine for a moment that you have worked hard, kept your money and saved up enough to be considered a millionaire. To do this you might have kept the same car for fifteen years or never upgraded your house. You made do with what you had while you watched others around you snatching up luxuries like wildflowers. How would you feel if those same people, who were busy spending while you saved, complained that you were lucky, that it isn’t fair, that you aren’t paying enough taxes?
Prolific articles condemning the rich and blaming them for the imbalance of wealth in our country clutter the Internet. Yes, the rich are getting richer in some cases. The more money you have, the easier it is to make money. So why spend all of yours?
Instead of blaming and castigating the wealthy, why not learn from them? Yes, there are rich people who take advantage, who manipulate others, and who play system. It’s important to remember that those characteristics run the gambit across all income levels. Many wealthy people are worth admiring and emulating.
For instance, I commend Warren Buffet for his frugality. My favorite fact is that he lives in the same house he bought in 1958 even thought he is the second richest person in the United States.
Get Smart!
These are just a few of many topics regarding money. They represent my humble opinions, obtained from lots of reading and research. I am not a financial expert; therefore, before you take any action, do research on your own. It’s your money, so it’s worth it. If you take anything away from this, I hope it is the following:
- Becoming wealthy is usually not a result of luck or social advantage; it’s from sacrifice and hard work.
- Act like a wealthy person and keep the money you make – then make it work for you.
- Take control of your finances; be deliberate.
- Instead of grumbling about rich people, identify the honorable ones and make them your role models instead of celebrities known for squandering.
Good books to read: The Millionaire Next Door and I Will Teach You to be Rich.
Share This:
Speak Your Mind