1. You Don't Live Below Your Means.
Let's face it, getting that new car, that new watch, those new shoes, and that extra drink at the bar feels great.... For a moment. In "The Millionaire Next Door" by Thomas J. Stanley (Which I recommend to everyone starting this journey) the author interviews various millionaires and compares them to those who didn't quite make it financially. What was common between the millionaires? They all had a very average car, they hardly spent over $100 on shoes, they mostly preferred a sandwich over caviar, and they could live without the fancy suits and unnecessary luxuries in life (Oh, and their wife was better at saving money then they were). Next time you make a big purchase, what's more important to you? Temporary pleasure? Or financial freedom.
2. You Have Poor Financial Management Habits
In "The Richest Man in Babylon" by George S. Clason, the central message throughout the book was to give yourself 10% of your paycheck no matter what. This means pay yourself first! It doesn't matter if you work at McDonald's, or if you're the CEO of Google, paying yourself before paying any of your bills is essential to becoming financially free. It's not surprising to me anymore when I hear about an NBA player, or lottery winner who becomes bankrupt (because I hear about it all the time!). It's not about what you make, it's about what you keep. Robert Kiyosaki (Founder of the Rich Dad series) is huge on this. He says even before he pays his taxes, he pays himself first. For him this is a way to motivate himself to work harder, because he knows that the taxes have to be paid. So do what the wealthy do.... Pay yourself first, then worry about everything else.
3.You Don't Know How the Rich Distinguish Between a Liability and an Asset
You think your house is an asset right? Many wealthy individuals would strongly disagree with you. The rich have quite a different definition than what you might find in the dictionary... They define it like this: An asset makes you money, a liability takes money away from you. So is that mortgage on your house giving you money or taking money away from you every month? Is that car payment giving you money or taking money away from you every month? Taking away money! Now, on the other hand, is the dividend on that stock giving or taking away? Is the rent your receiving every month from your real estate investment giving or taking away? I think you get the point. This simple understanding my friends, is why the rich get richer, and the poor become poorer. Own assets, not liabilities!
4. You Invest in What You Don't Understand
If I came up to you and told you to give me your money, because I was going to invest in 10 random stocks with your money to see what happens, would you give me your money? Of course not! One of Warren Buffet's #1 rules to investing is to make sure you understand something before you invest in it. When you are putting your money in a mutual fund, do you know every single stock that your money is going towards? Are you investing in crypto because everyone else is, or because you truly understand what you are doing with your money? Putting your money into something you don't understand is just asking for it... If you don't understand it, don't do it!
5. You Save Your Money
Wait what? I'm not financially free because I save my money? That's right! Grant Cardone, author of "The 10X Rule" and "The Millionaire Booklet," talks about this all the time. He says that what Wall Street doesn't tell you, is that money gets bored... Very quickly. If you have your money in the bank it is so much easier to get bored and blow it on a vacation, or on any consumer item! Getting rid of you money as soon as you get it is one of the single most important laws of money. The goal here is get your money to work hard for you, not for you to work hard for your money. Whether it is the stock market, real estate, a bond, crypto, or mutual funds (make sure you understand it!), putting your money to work immediately rather than keeping it underneath your bed is one of the key ingredients to creating wealth.
I truly believe that working on your financial health is one of the single best ways to create freedom, control and fulfillment in your life. Don't sit back and be average, go out there and make a difference! If you want to change the world in anyway, it's going to take money, and if you're not willing to take the necessary steps to manage your finances, you're going to end up like the rest of America.... Broke! Take care of your money so you can spend time with your wife and kids, make it to Johnny's soccer game, and ultimately, make the world a better place.
Thanks for reading. Many more to come.
