A wealthy mindset — the key to success
1. The wealthy think long term
More than anything, those who are poor and will stay that way aren’t considering their life in 20 years or perhaps five years. They’re thinking about Friday night, or worse, what they’re going to have for lunch.
The wealthy, as a rule, are planners and began planning their retirement in their 20s once they received their first paycheck. When the middle class gets around to thinking about retirement, typically in their mid-50s, the wealthy are doing estate aiming to attempt to find out how many generations they will make their wealth last.
When an automobile must get replaced, Middle-Class Mike buys a brand new one on credit, because he didn’t realize that car would need to get replaced someday. Wealthy Willy purchases the car with cash, with money he’s been setting aside for that purpose for years.
When considering whether he can afford something, Poor Peter thinks, “What is the payment and how does that relate to my income?” or “How am I able to make the payment lower?” Rich Rick thinks, “What is the least expensive way I can acquire this item?” If it must be bought on credit, Wealthy Willy and Rich Rick work out a way to minimize the interest paid or at least compare the rate of interest to their expected investing returns.
2. When Spending, the wealthy specialize in quality and happiness
When a rich person purchases an item, she focuses on its quality over its price. it’s not simply “If you’ve got to ask, you can’t afford it.” She has learned that a top-quality item will often be less expensive in the long-term because it’ll last longer thanks to its superior craftsmanship. More importantly, she has a priori determined how to spend in a way to maximally increase his happiness.
Once she has decided that a fancy car will make her happier than a new boat or a vacation or retiring earlier, she saves up for and purchases the fancy car. She derives pleasure from the whole experience — saving up and anticipating the purchase, making the purchase, and using the purchase afterward without having to worry about making future payments for it. It isn’t that wealthy physicians don’t spend, it’s that they spend deliberately.
3. The wealthy specializes in providing value to others
It is almost a universal rule that a successful business owner is way more focused on her customers than on her bottom line. She knows that if she provides value to others, the money will eventually take care of itself.
Also, after reaching a particular level of success, the utility of additional income to the owner declines markedly. If she continues to work, she does it because she enjoys helping others and building something valuable. It truly isn’t about the paycheck every other Friday, and that concentrate on others breeds even more success.
4. The wealthy have an ownership mentality
As a rule, the rich prefer to be owners, instead of employees. An employee’s income is often capped at her salary, but a business owner has infinite income potential. A business owner never pays an employee more income than she will generate. If she did, there would be nothing left over for profit.
When a business does particularly well, those who own it derive the benefit. When it does poorly, the owners do poorly. But so, do the employees since they lose their job. All the downside and none of the upside.
Likewise, the wealthy prefer investments where they function as owners. this means investing in their businesses and those of others, whether privately owned or publicly owned (i.e., the stock market). They also invest in land, where they will collect (and increase) rent and enjoy appreciation. They invest instead of speculating, holding their investments for many years instead of hours.
Meanwhile, the poor invest in bank accounts, CDs, and similar investments if they invest in the least.
5. The wealthy become financially educated
The rich learn how to speak the language of finance and investing. That doesn’t necessarily mean that the wealthy don’t use financial, accounting, or legal advisors. However, they are aware of it is impossible to have an intelligent conversation with a financial professional if you can’t even speak their language. Inflation, depreciation, deductions, Roth IRAs, long-term capital gains, and other terms are all just simple vocabulary to the wealthy, but they could also be Chinese words to most Americans. the wealthy pass this language on to their children, giving them a competitive approach to their schooling and careers.
The wonderful thing about all these habits and knowledge is that no one is excluded from developing them. While there’s lots of income inequality in our society and undoubtedly factors beyond your control, an exact amount of your financial success lies entirely within your control. Develop the mindset of the wealthy and achieve your financial goals.
6. The wealthy put themselves in a position to take risk
While it’s true that the wealthy are often much more willing to take significant risks in their careers and with their investments than the poor or middle class, they’re also experts at getting themselves into a position where they can afford to take that risk.
They avoid consumer debt, like credit cards and auto loans. They minimized their educational debt and paid it off faster than their peers. They live on a fraction of their income, allowing them to own cash continually available for extra investments. They minimize their fixed ongoing expenses through debt reduction and deliberate spending. They keep enough money in safe investments that they can afford to lose employment, start a business, or take care of a family emergency without having to tap long-term investments or retirement accounts.
They also know their worth within the marketplace and are continually improving their skills and knowledge so that they are going to be worth more annually to their clients and/or employers. Confidence breeds success which breeds even more confidence. In many ways, those destined to become rich literally will themselves to become wealthy through the power of focus.
