When you become rich, meaning you truly earned your wealth through hard work over time not inherited it or won the lottery, you learn a lot along the way about how it messes with our minds, the mistakes most people make and how it distorts our personality.
First off, itâs difficult. Thereâs no secret that it takes time. Rich quick doesnât exist and even if you do win big in the stock market as a retail trader due to pure luck, timing and lack of control, you most likely will blow it anyway like majority of lottery winners and athletes who cannot deal with a lump sum.
Instead of timing the market. Spend time in the market.
Since primary school, weâve listened to our teachers convince us that money is scarce. It is a precious resource that is only reserved for the wealthy.
That is the worst lie you could tell yourself.
Anyone can become wealthy and it doesnât have to be in the form of owning 60 hotels or becoming the next Bezos.
You could become a shy, lonely millionaire out in the woods, no one knowing a clue.
Spoiler Alert: Thatâs how most are like.
When you acquire a certain wealth, you start to not pay attention to it anymore. You donât care about your image and donât attempt to show off. You worked so hard for it that showing off is the most dangerous move you could make to loose it all.
The truth is, money is abundant but our economicâs teachers have convinced us for so long it is sacred. Yet, shifting your mindset and understanding that itâs actually easier to acquire than keep it will put you on the right track.
The Job Fever
Most people assume that working a 9â5 job will make them rich. Unfortunately it cannot because by the time you are 5â10 years into corporate, you will start seeing drastic effects on your health and paycheck unless you miraculously studied personal finance in school and in that case you still will have some problems since thereâs no such thing.
The most common side affects those in the corporate world experience only 2 years in include:
-Gray hairs
-Wrinkles
-Loss of appetite
-Low sleep
-Poor concentration
-Horrible memory
-Divorce + broken relationships
-No fulfillment
-Drugs and alcohol seem appealing and quick fixes
This is the problem when you chase money. We assume a job will provide us stability forever and we are irreplaceable. Unfortunately no job is like that because if it was, technology wouldnât be present.
This leads me to my first point that only wealthy people understand:
#1: Your Company Defines Your Worth
When you apply for a job, thereâs already a set salary/wage/paycheck waiting to be given to you after you of course get selected through the screening/interview process.
You donât get to decide what you are worth because someone from corporate, presumably HR decides that.
Sure, we all think we are worth more than we are given but we cannot make that assumption or be provided it.
We have to choose to go forward with what weâre given or keep searching for better opportunities with patience.
Thatâs the trap most of us fall into.
We want to take the more comfortable path that we donât deserve in order to feel stable.
Donât get me wrong, thereâs nothing wrong with wanting support and a 9â5 job to keep you afloat, but if youâre only relying on it expecting to earn exactly what they told you you would earn, that is the riskiest move.
Not only your paycheck is slashed in half due to taxes and the cost of city you live in, your job provides no passive income. The more you work, the more you will get paid but many times, not always as well.
Choose your career path wisely. What I advice before going head on into being an entrepreneur is to make sure to adopt several passive income streams, rent out part of your home, build and sell your intellectual property, negotiate your salary and if and when you finally want to leave, negotiate that severance if possible.
As Buffet states, âIf you donât find a way to make money while you sleep, you will work until you die.â
#2: Debt Is Your Friend
Most people label debt into the ugly bad category. Thereâs no doubt debt is a liability and an expense that keeps on building slowly with interest overtime + principle that needs to be paid off beholden to a bank or government, but that doesnât mean it cannot help you build the life you deserve.
Without taking risks in life, you wonât get anywhere.
Staying comfortable in the same place working a 9â5 job will only get you part of the life you deserve.
Why not reach bigger?
Money will always be an excuse and in fact you really donât need much to earn big.
Bad Debt: Anything that depreciates in value and offers nothing in return ex. bags, luxury good and my favorite: shiny new cars that loose 50% of their value the moment you drive them off the lot.
Good Debt: Helps make money for you in the long run (still something you need to pay back but is an investment in your future hoping to give you a boost in ROI.)
This includes: student loan debt, higher paying job (career down the road), business loan, mortgage to earn income on your home as an assert, investments into your health or memories such as trips.
Of course any type of debt needs to be responsibly managed and I donât recommend going into massive debt for any reason but now a days especially with record low mortgage rates hovering around 2.5% thereâs no better time to take out a 15 or 30 year fixed rate mortgage that will help you save money on your down payment and eventually once itâs paid off, the house will appreciate in value if you choose to sell it-assuming itâs purchased in a trendy, in-demand area that will still be popular in the future.
#3: Slow It Down
Wealth is not the same as making a few bucks via Robinhood and loosing thousands. Thatâs gambling where traders have no idea what theyâre doing but call it a game.
Wealth takes time and if you want to be in it to win it, you have to have patient with unwavering commitment and dedication.
If you do anything for a consecutive period of time, eventually you will get noticed.
You probably wonât become the next Jay Z or Michael Jordan but why would you want to be?
You donât know what their lives are like.
They could be miserable inside plus you have to be authentically you.
No one else. Everyone else is already taken.
I follow the 3 year rule for my big goals. Most people quit not due to a lack of knowledge or low IQ, etc. rather a lack of patience.
Itâs simper than we think but waiting is difficult for things that are priceless because there is no immediate reward. We waste an average of 20 hours per week scrolling, watching, texting, you name it not helping us get anywhere.
The more you stick to something, the more luck will be presented. Itâs not difficult, itâs the frame of mind. Most people take 1 step in 20 directions instead of 2 steps in 1 direction.
If you want to take the shortcut, I suggest you get ready to loose money in Robinhood and eventually make some small gains through options and derivatives reviewing Reddit trading moves all day.
That should surely be a waste of your time.
#4: Rich Isnât Rich Anymore
Although the Fed announced no inflation hikes until 2023 to lower unemployment and get the economy back and running all dependent on herd immunity and the vaccine rollout, inflation is still present.
As a background check, inflation is when our purchasing power declines. Itâs mainly dependent on the CPI index which is the amount of money consumers spend which has decreased since the holidays in 2020.
Inflation hurts the top 10%+ the most.
The 10% is defined as individuals that are worth more than $1m since theyâll be having to work harder to sustain their money.
The new $3m will be worth only $1m in a few years.
This means reaching your target goal of being in the top 10% will be even harder in the next coming months when the pandemic recedes.
A way to combat this is to take advantage of tax advantaged accounts where your money isnât depreciating due to inflation( cash especially) and instead growing through compound interest.
These accounts include a Roth IRA, IRA and 529 plan (for those in school still). In addition, I would suggest to take advantage of the low interest rate environment by possibly buying a fixer upper and a taking out a decent mortgage to lease the place out to renters to earn passive income.
Lastly, make sure you have several passive income sources. The average millionaire has around 5â7 and this can range from rental properties, intellectual property, investments, businesses (blogs, podcast, e-commerce site, book deal, etc.).
The world is your oyster! Money is abundant!
#5: Looks are Deceiving
The average millionaire:
-Wears a $60 suit
-Drives a 5â10 year old car
-Wears plan colors no logos
-Values family and time
Focusing on your image is the worst thing you can do to your character. Most people become blindsided by money and obsessed with it assuming that they can now try less to be a more sincere person because money will help them get there easier.
Similarly to the college admissions scandal, my friend (read here) whose parents got caught paying roughly 3m to get her into college thought they were invincible.
Itâs strange how money messes with our heads assuming we can get away with anything and it will help us become better people when in reality, you have to prove even more you are worth your worth with higher expectations.
Same case when you graduate from a top tier school. Believe it or not, 80%+ graduates from Stanford, Harvard, Yale, Princeton, Dartmouth, etc. are working in the corporate sector or in middle class jobs.
That is a disappointment especially since they expected to easily get into their prize position having went to a great school after all. I guess they never learned school doesnât guarantee anything.
As a result, the more you have, the more pressure and responsibility you must carry to prove youâre worth so donât show off.
90% of Americanâs net worth is tied up into their property and 85% of luxury car owners have to take out debt to pay for the car.
We have our priorities wrong and care about peopleâs opinions too much. Remember when you are struggling or trying to pay down that debt, that person you tried to impress will not help you.
The more you try to impress, the less impressive you are.
Become happy by being frugal and a minimalist by choice. When I started adopting this lifestyle in HS I was much more content with building my relationships, focusing on my health and valuing less = more. You really donât need much to live and more junk will not make you a better person.
#6: Money Is Important But Doesnât Define You
Being financially free means you have enough passive income to support yourself and live off of it. Being wealthy comes with more choices, not happiness.
Once your income exceeds your expenses itâs a satisfying feeling even more so when you are not beholden to debt because you donât truly own that asset until itâs paid off.
But the wealthy donât obsess over debt. They make it an obligation to save and spend wisely by choice not by force. They use debt to their advantage and know that money is key to living a fruitful, stable and supported life but it isnât everything.
As discussed above, it wonât make you a better person but it is necessary to think about.
If you have a cash cushion that can cover 6â12 months of emergency expenses, have a mission/ purpose beyond making money and are in good health then thereâs nothing stopping you.
Regardless of what you majored in in college or field you work in today, you have to know how to properly manage your money. Break that taboo and understand money is a means to an end but not the end.
Donât chase it because it wonât bring you more. Define what your goals are in life and thereâs more to life than hitting more zeros in that bank account.
Richness
Chasing money is pointless. It will obstruct you from making more because you are obsessed with it for no reason. When you have enough money so that it is no longer a problem for you, you will look beyond the dollar sign and focus on what matters most.
Money is not the most important thing at the end of the day but we all need it to survive.
It does not define you and you have to work and prove your worth yourself. Changing your relationship with money is key and most people just wait until they hit a certain amount and then want to change.
Fixing your mindset will help you achieve more but learning from the ultra-rich that are truly wealthy inside not just poor and look rich on the outside will help you uncover where happiness really lies.