by Dr. Charles Alonzo Peters
How do two people with the exact same income end up at financially opposite ends of the spectrum – one wealthy and financially free, the other struggling to keep their head above water?
Why is it that people with seemingly limited means are able to build great wealth? Take Oseola McCarty for instance. Growing up in the segregated South this African-American washerwoman earned a meager salary at best. Yet near the end of her life she had saved enough money to endow a scholarship at the University of Southern Mississippi, providing young people with the opportunity she never had.
What separates the financial superstars from the rest of us? – While we walk around with a consumption mindset, they work off of a wealth mindset – a mindset that views the world from an entirely different perspective.
The wealth mindset, for example, laughs at those who eat out every day and instead saves money to purchase the Subway franchise where everyone is eating. The wealth mindset would rather own Coach stock than the newest Coach bag.
In his book, The 5 Lessons a Millionaire Taught Me, Richard Paul Evans delves deep into how the wealth mindset can set us financially free.
According to Evans:
The most substantial people are the most frugal and make the least show.
How many of us envision the typical millionaire driving the Benz, sporting the Fendi handbag, or flashing the Rolex? The true millionaire is more likely to sport a late model Toyota Camry or live in a modest size home, counting their paper while the rest of us struggle in debt faking the funk. Yes you can either act rich or be rich.
Money makes a good servant but a bad master.
Those that practice the wealth mindset make money their master instead of acting as its slave. They know exactly how much they have and know exactly where it’s going. Ask yourself, how many of us know exactly how much we spent on clothes, food, eating out, gas or entertainment last month? Knowing where your money is going allows you to redirect it in ways that prevent waste and build wealth.
The road to wealth begins when you decide to keep a part of what you make.
Think about all the money you’ve earned in your lifetime. Now ask yourself how much money have you saved. We hand out money to everyone else but we forget to pay the most important person, ourselves. It’s simple but true – pay yourself first. Placing 10%, 5%, even 2% of your salary aside into stocks, bonds, or even a simple savings account will allow compound interest to make your money grow.
Successful wealth builders understand the world is designed to take their money.
No one wants you to save. From the time you get up to the time you go to bed, advertisers pull at your heartstring, tug on your emotions, and convince you that you can’t live without whatever they’re peddling.
The wealth mindset resists. It considers every expenditure carefully. It refuses to equate spending with happiness. Once you realize it’s all a game designed to separate you from your money, you’re headed down the road to wealth.
The wealth mindset believes freedom and power are better than momentary pleasure.
Buy now and pay later – simple words but they often lead us down the path to crushing debt. The wealth mindset resists the urge to buy when we don’t have the money. It understands that debt prevents us from building wealth.
We can act like everyone else building debt with a consumption mindset. Or, we can dare to be different. We can develop a wealth mindset that leads us to financial freedom.
BMWK, Why do you think so few people operate with a wealth mindset?
So few people operate with this mind state because its not “sexy” and showy. They’re afraid of being called cheap and/or of not playing the part of the world traveler, Benz owner, etc.
Im the first in my family to be fairly successful financially and I definitely get questions about why i still drive an older car, or why i live where i do, or why im not always opting for the newest greek para. Its a mind state.
I was thinking about this the other day!!! Why isn’t this a course for high school students? Maybe not “How to be a Millionaire” necessarily but why aren’t we learning about how to balance a check book or managing finances before going to college or joining the real world? Parents aren’t always the best teachers on EVERYTHING. My Dad was horrible with his finances and my Mom the complete opposite. Now, he’s struggling trying to find another job when he should be worrying about retirement and my Mom retired almost 10 years ago and has been travelling and enjoying life with her husband. I unfortunately operate just like my Dad and it terrifies me. My husband operates like his Dad and he was pretty terrible with finances too. Both of us have a bad credit score and debt up the wahzoo! I was thinking how does one create new and better habits especially when it comes to finances?!? I want to get it together but I’m a slave to money and momentary happiness. PLUS, when kids are in the equation, it’s hard to tell them no most times. We need HELP!
Another thing that gets us into financial trouble is a lack of planning or an inability to plan. One of the things that characterizes poverty is only being able to address today’s needs. When you come from an environment where tomorrow’s money is not reasonably guaranteed you tend only to think about today. Even when one’s financial status changes this mindset can persist. A financial mentor once told me you can often judge your financial progress by the length of your planning. If you can make fairly detailed financial plans three to five years into the future you are really taking off. And if you can execute those plans (with the reasonable adjustments) you are really on your way. However, shaky employment and an unstable home/personal life can kill any attempt at extended planning.
This shows, yet again, why marriage is often a net positive for ones finances. By working together couples can gain the personal and economic stability needed to better plan and direct finances. Both my wife and I dealt with financial struggles in our respective families while growing up. However, we have been able to accomplish a lot through cooperation, agreement, and just general support for one another.
Check out Dave Ramsey “The Total Money Makeover” and remember if a t first you dont succeed, try try again. Making the effort puts you in the game. Follow thru will keep you on track. Perserverance will see you to the goal.
You’re so right. Planning is the key to financial success.
Putting off temporary gain today for much bigger gain in the future is what too few of us do.
In his book The Top 10 Distinctions Between Millionaires and the Middle Class, Keith Smith claims, “Millionaires think long-term. The middle class thinks short-term. Create a clear vision of the life you desire, and focus on it.”
I’m not big into conspiracy theories but I think there is a vested interest in not teaching kids about money so they can keep the American public in debt, paying excessive credit card interest rates buying overpriced stuff we don’t need.
I can understand what you’re going through. Personal finance is all about behavior modification. A good book is Michelle Singletary’s The Power to Prosper. She talks about a 21 day spending fast which actually helps you modify your behavior. I tried it and was surprised at how much money I saved.
I love how you drive an older car. I do as well. Most people don’t realize that cars are one of the biggest money drains you’ll ever encounter in life. It feels good not having a monthly car payment.
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