The No. 1 financial goal that I hear from people is that they want to be financially independent. They don’t want to worry about money when they are retired. They want to pursue their dreams and passions. They don’t want to be overly dependent on family or other entities for money. Many spend a lifetime to become wealthy and believe that it is out of their reach.
But when you study the wealthy and how they got there, it isn’t rocket science. In fact, anyone can do it, but it takes a certain type of thinking, investing in the right places and hard work to get there.
Over the next couple of weeks I will cover secrets of the wealthy: How they got there and, more importantly, how they stay there.
- The Right Mentality. Being wealthy isn’t about inventing the latest product or service, or getting lucky in the lottery. It is about thinking like the wealthy.
- View of Savings. Benjamin Franklin said, “A penny saved is a penny earned.” Today, I am sure Franklin would say, “A penny saved is two pennies earned,” since there were virtually no taxes in his day. In order to save $100, you have to earn more than $200. Why is that? You have to pay federal income taxes, state and local income tax, Social Security and Medicaid, fuel/gasoline tax, property taxes and several other types of taxes on the $200 you earned. The average U.S. citizen in 2013 paid close to 60 percent of their income in total taxes! So in order to save $100, you have to earn more than double that. Another way to look at it is not spending money is the same as making money. If you save $2,000 a year by switching to less expensive lattes, that is the same as someone paying you more than $4,000! The wealthy live below their means, not beyond.
- Action and Risk. Instead of hoping for good luck, they create their own good luck. They take action to find ways to earn more, spend less, save more, and are able to take the necessary risks to achieve success. They dream of the future and their goals, not wish for the good old days. Doing this isn’t easy. It requires resiliency and the ability to fail forward. The wealthy see failure as a stepping stone to success and don’t quit until they get the deal!
- Invest in Themselves. The wealthy invest in their own education, especially acquiring specific knowledge and expertise. They understand it isn’t always about doing something to get rich, but to be something to get rich. Your personal brand and what you bring to the table are important. The wealthy constantly are looking to improve and grow. According to Steve Siebold, author of How Rich People Think, the wealthy would rather be educated than entertained. They understand the power of learning and use that knowledge to become more successful. In addition, they also plow profits of their investments back into themselves and their own ventures to continue growing.
In the next couple of weeks, we will cover how they invest and what they invest in.