Creating the Wealthy Mindset
The wealthy think differently. This is true and an inescapable fact. The other thing is that there is a poor mindset and a wealthy one. The rich have a different approach to life. They plan, risk and manage their money in a different manner.
They also have a positive attitude towards life and opportunities. The first and most important step to true financial freedom is creating this wealthy mindset for yourself. This also involves a no-holds barred, honest look at your life and assets.
Creating a starting place is as important as moving forward, so it does not matter if you start with $1 or $1,000,000. It is all about the mindset and the will to move forward to creating your wealthy mindset and wealth.
Investing and Managing Your Wealth- Becoming Truly Wealthy
1 Redefine what wealthy means for you.
Being “rich” simply is a term for many people. Technically, wealth or being wealthy is defined as having an abundance of resources or possessions. The high life does not equal wealth.
Having a gigantic mortgage for a beautiful home or a huge car payment does not equal wealth. Are status symbols your end goal? Does wealth for you mean that ability not to worry about bills or how much is left in your checking account at the end of the month?
The truly wealthy understand how money works
Does it mean providing comfortably for your family or being free from financial worry? Does it mean the ability to afford luxury designer goods or getting a membership to the local country club? Being rich or being wealthy can also mean you enjoy a comfortable retirement.
Does wealth mean something totally different to you? Your definition of wealthy goes a long way towards setting your goals.
2 Another important step when it comes to managing your wealth is to set goals. Start with an overall battle plan, such as “By the end of the year, I will have more at least $500,000 in savings.” Why? You need to be a visionary to be wealthy.
A common factor that sets the millionaire apart from the average Joe is this: they know they wanted to be wealthy and they were willing to take the steps to reach their goal. To reach one goal, you have to make smaller goals and reach them.
Every little step you take, every penny you save matters. Use smaller goals as stepping stones. For example, to save that $500,000, one needs to set aside $5000 every single month, invest or cut down expenses.
3 Manifest your financial destiny by setting your subconscious towards specific goals. Create dream charts by cutting out pictures of your dream status or words that empower to help fuel your subconscious and get you to wear you want to go.
Never underestimate the power of your will and mind. Wealthy people never say they cannot do it, they think of ways so that they can. Write it down. Seeing what you want, and getting what you want involve seeing it in black and white.
4 Know how much you are worth. Take stock of all your assets and income and subtract your debt. Many people go through life financially blind, not knowing how much they are worth or how much they owe and often end up blindsided by money.
5 The test: Your age x (your average household income from all sources – inheritance) divided by 10 = your net worth. The rich have a net worth often double or triple the amount. The average American has less than half. The goal is to double your net worth.
6 The truly wealthy consider themselves as the foremost asset. Accordingly, they pay themselves first. They also tend to invest in themselves first, especially when it comes to education. Take classes and groom yourself to be the millionaire, entrepreneur and success you want to be.
7 Guard your ideas with the passion of the Secret Service. Commodities are now no longer limited to labor, but have expanded to include ideas, imagination and opportunities.
8 Keep in mind that the average millionaire is not who you think he is. The frugal rich stay richer – if you do not believe this, think of all those high flying celebrities who end up with their homes in foreclosure or selling their tell-alls on TV to pay for all that Cristal and all those houses. The famous IKEA owner drives a Volvo. HSBC’s chairperson famously goes around the main office turning off all the lights long after the employees have left.
The stories go on and on. The rich do not live the lifestyle of the rich – they stay rich because they are frugal misers at heart.
9 Assess your income and what you can do with it. 80% of modern millionaires were able to get there on annual incomes of $55,000 or less. Even meager savings eventually add up to thousands or millions of dollars.
10 When you look at a job, always know how much the head honcho gets paid because this will later affect your income in terms of promotion, benefits and future potential earnings. If you are gunning for a six figure salary and the current CEO is getting by on $300,000 a year, then maybe the job is not for you.
11 Find alternative ways to generate income if you are unhappy about your current level of earnings or the amount of the salary you currently have. This can mean looking for other employment with better pay or benefits or finding ways to boost your income little by little. This can mean starting a cottage industry business, learning to invest, buying and selling online or any number of means to add to your nest egg.
12 Create forms of passive income, the type of income that you receive with little to no effort. Examples of this include: rent from property you own, licensing patents or dividends and returns from investments. Passive income can come from many sources. Exploiting the business possibilities of the Internet through blogs or sales from eBay or Amazon is one way to add to your income with minimal effort.
The truly wealthy prefer passive income anytime. It frees up time for you to do what you want, even while you earn.
13 Be diverse. Create streams of income, do not rely on one large river. A job that pays $3M is great, but an accident or sudden layoff can cut you off. Think outside your salary. A job paying you $1M a year, plus real estate profits that amount to $1M and another $1M from stock is a far easier and safer thing to manage.
14 Learn to hold off gratification. A wealthy person knows how to delay gratification and sacrifice the now for later. This often comes with a positive attitude towards work and wealth, such as: “If I invest now, I will make 10% more later.” The wealthy do not think of now, they think of the future.
The present is merely an opportunity.
15 Change your mentality about spending. Do you really have to have that (place object here) now? The truly rich hold off gratification, knowing that what is trendy, popular or a must have today may not last until tomorrow.
16 Never be frightened of failure.
17 Be realistic. Growth and wealth do not appear overnight, unless you are lucky enough to win the lottery or find long lost treasure. Investments need time to mature and savings need time to accumulate. Patience will be well rewarded. The wealthy know that scrimping now will lead to better results in the future.
18 Create a sense of urgency in your life. Do not wait for things to happen to you. You may think that you are playing safe by waiting around or looking for the next big deal. This is the financial equivalent sitting around. Take risks, invest, start the business now. Seize opportunities the moment they happen. The first to get there often wins, leaving the losers in the dust. Taking stock of what you have right now can have some advantageous surprises. For one, you may find out that you have more than you think. Second, it gives you a clear cut place to start and helps you findbalance as well as set goals. After all, you cannot move forward without knowing where you come from.
Cutting Corners Where They Matter When it comes to wealth generation, another important factor that is hard to follow is “living within your means.” For many people, living in debt has become the norm. It is common for the average person to be buried in debt before they reach the age of 25.
A consumer-driven economy based on floating credit also creates the impression that wealthy means more products. After taking a hard look at your assets and income, now you have to check your lifestyle and see where you can cut down on expenses.
19 Write down your expenses. Do not lie to yourself. There is nothing like seeing it in black and white (or red). Keep track of your expenses on a spreadsheet or if you prefer, in a notebook. It gives you a concrete idea of where you are spending too much and where you are spending too little. If you are looking to save more, write down everything you buy and keep track of it. Do you really need to spend $5 a day on designer coffee? That amounts to $1800 dollars a year just on your morning cup of Joe.
Is it paramount to have the latest car every single year when you are hip deep in auto loans?
20 Cut those credit cards. The average person owns at least seven cards. The average number you need to sustain a good to great credit score? The answer is one or two. One well-managed card does more for your credit score than the dozen over extended cards you have. If you can manage without one, why not cut them all? Your credit score is not just affected by cards, but by other loans you have in your name, like your mortgage or auto loan.
21 Ruthlessly cut out all the services you do not need and monitor those you do. One millionaire famously counted the sheets in toilet paper rolls because he thought suppliers were overcharging him. He was right.
22 Before you cut those cards however, understand the utilization ratio: the total credit used versus the total credit available to you. Many people keep multiple cards for fear that one or more lines will be cut, increasing the ratio over time. The goal is to have a very low ratio compared to debt, low balances and even lower interest.
23 Get a free copy of your credit report. Dispute any outdated items. Keep in mind that items should slide off, not stay on. Focus on judgments, liens and any items that undermine your potential to lenders.
24 Understand how interest affects your debt. The wealthy understand how interest works for investments, for loans and how it compounds over time. Those who are not wealthy do not. Compound interest is interest that is added to the principle at certain intervals on the debt. This means that the loan/balance of a certain loan gets higher over time and you end up paying more interest. Compounding rates differ but can be legally done on a yearly, quarterly, yearly or even daily basis.
A loan with a starting principal of $1000 charged with 20% interest per year turns into $1200 at the end of the first year and so on. In contrast, simple interest does not add to the principal of the loan, but is the amount charged for use of that money or loan.
25 PAY DEBT OFF ASAP. Pay more than the minimum on loans. Satisfy the interest and part of the principal – the debt amount will lessen over time and the bonus is you pay it off faster. The more you pay now, the less you pay later.
26 Keep records of any and all transactions over the Internet or phone, especially if you are fixing your finances.
a. Print or save any changes to your account. b. When calling customer service, ask for the representative’s employee number and record the time of the call in the event you need to follow up on a request. c. Keep exact files and amounts. d. Keep copies of everything.
27 Be hyper-vigilant when it comes to cards, loans or mortgages. Look for ways to lower interest, increase payments and keep an eye out for changes that could affect your loans.
28 Make a budget and stick to it. Think of it as a budge-it. Once you make it, you do not budge-it. Monthly and weekly budgets should be calculated to the penny.
29 The truly wealthy or those who want to be consider debt to be death to their portfolio. They only allow themselves to go into debt when they need it, and in that case they often refer to it as capital or even better, they often get it from someone else. Keep the motto in mind when working with debt and get rid of it as soon as possible.
30 Separate your accounts to keep track of your money. Keep a savings account, an investment account and an earnings account.
31 Know the consequences of for bearing or deferring loans. The breathing room you get is often paid back threefold in capitalized interest or an increased loan principal.
32 Create an emergency fund or funds. These accounts should contain the equivalent of 3 to 6 months salary using low risk accounts (savings, certificates of deposits or insured money market accounts) as a safety net not just for your finances but for unexpected events in your life. This prevents you from dipping into your earnings or cashing in other income resources when unexpected and unwanted events happen, such as sudden illness.
33 Remember that you can grow rich now on money that you are throwing away. To be truly wealthy, you have to know that a simple dollar is an investment goldmine.
34 On average, millionaires spend more time selecting what to buy than buying the product itself. Why? Because they look for the best bargain before laying their money down – and ask for discounts before making a selection. Apply this principal to your life and watch your expenses go down. Instead of selecting the first brand-name product you see, take the time to check what exactly you are getting. For example, many commercially branded cereal and grain products have exactly the same nutritional content as their generic cousins, at almost twice the price.
Remember that you are paying more for the brand than you are for the product itself. Millionaires and the wealthy also know the value of patience. Many stay in the first home they bought long after they can afford a more expensive one.
35 Never accept a deal at face value. Negotiate until you feel the terms are in your favor. The most important thing you should know is that without financial freedom, you cannot be truly wealthy.
The most important thing is to create a base: a lower debt to income ratio and leeway to save and put money aside for investing later on. It also frees up your mind so you can implement the law of attraction.
Implementing positive thinking in your life can draw in positive forces and create more and more goodwill and luck. It is hard to think positive when you are constantly worrying about bills or making payments. By thinking positive and creating more positivity in your life, you bring in not just monetary wealth but, being wealthy in your personal life as well.