I was with a group of friends recently and among the topics that got thrashed around (besides the Rugby World Cup, the cricket and a bit of music) was the money we had earned during our working lives.
One of the group said, “for the first time in my life, I am wondering where all my hard earned money has gone. Why aren’t we wealthy?”
Part of the answer is obvious. The taxman takes a good chunk of what you earn, as does the bank if you have a mortgage or the landlord if you rent. Then of course you have to eat and then there’s the kids.
What is your plan to achieve wealth?
What steps are you taking each day to progress yourself towards becoming wealthy (whatever wealthy means to you)? Or are you simply hoping the universe (the government, or family) will provide for you and you will be fine.
Here are the cold hard facts. If you don’t take responsibility for yourself and put the steps in place to become wealthy or financially free, then you simply won’t get there – okay, maybe a major lottery win would do it.
The number one obstacle preventing couples from building wealth is communication. Studies reveal that a huge percentage of couples don't talk about money. Don't talk about their goals.
Couples would rather discuss sex, death, religion or politics, anything but talk about their finances. And it isn’t just their friends that they find it difficult to talk to about money, but it is also the one that they have chosen to spend our life with and raise a family with.
Why? Among many of us money is taboo and then there’s embarrassment and the fear of conflict. Often, our own life experiences also make us bad with money.
We all have different financial beliefs that are shaped by our childhood and environment which tend to guide our behaviour.
How do you build wealth?
You can put a budget in place and that will help, just bear in mind a budget is a tool. It is very helpful as a short term solution, for example, if you’ve got yourself in a debt hole and you need to get extract yourself ASAP.
A budget is not a long term solution to building wealth.
Budgets can makes you feel miserable and deprived which makes you crave whatever you are denying yourselves, even more. So, don’t be surprised when you fall off the budget wagon and splurge more than you did before!
Let me explain.
Budgets are all very rational and keep the economists happy, but the economists forgot one very important point. We aren’t always rational especially when it comes to using money! In fact, we are predictably unpredictable.
So, if you can’t budget your way to wealth how do you get there?
It is a two-pronged approach. The largest component of becoming wealthy is in your mindset.
It is the choices you make to delay gratification today for something better in the future. It is not keeping up with the Joneses and making your own decisions about what is enough for you now.
It is about understanding your own money psychology and what pushes your money triggers and your investment strategy.
It is understanding how your partner’s money psychology fits with yours and how to work together as a team to build a shared vision for your future. That includes what being 'wealthy' looks like for you.
It is about understanding and aligning your Values.
Then, spend time and money in ways that are aligned with those values. For example, one family might find they spend a lot of money on the kid’s sport, for another it might be the annual family holiday. The important thing here is, they have made choices based on their values.
The second component is having a Money Plan (as distinct from a budget). A Money Plan that is based on the principle of making choices that work for you and meet your needs and having the appropriate financial and non-financial strategies to achieve your goal.
To have the lifestyle you desire now, as well as creating wealth for the future takes a complete change in mindset and strategies.
Think on this. Real wealth is discretionary time; money is merely the fuel to get you there.
If you would like me to help you get on track to finding your wealth, or just want to make some changes, then come email me on lynda@moneymentalist.com
*Lynda Moore is a Money Mentalist coach and New Zealand’s only certified New Money Story® mentor. Lynda helps you understand why you do the things you do with your money, when we all know we should spend less than we earn. You can contact her here.
11 Comments
The formula is simple. Spend less than you can earn and put the spare income to good use. As wingman says get a good education and/or skills that are in demand. Only buy stuff that you need, not what you want. Avoid paying people to do stuff for you that you can do yourself and learn new skills if you have to. For example I drive a 15 year old Mazda 3, do my own car maintenance, build my own hi fi systems, cut my own hair, restore my 25 year old leather lounge suite rather than buy a new one. If you come into some unexpected funds don't splurge, invest it wisely. Avoid debt unless there is really no choice and then make it a priority to pay it off. It requires discipline to maintain but pays off in the long run.
Real wealth is discretionary time; money is merely the fuel to get you there.
A really great statement, one many fail to understand.
Looking at my peer group, the biggest drainers of wealth are:
- Bad relationships
- Bad health (to yourself, or your dependents)
- Bad debt
Some are luck, some are conscious choices. Some recover, other's don't.
Our levels of savings reflect what is happening in the broader economy and it is not just down to personal choices. The levels of household debt, the governments fiscal balance and our financial balance with the rest of the world.
All money is created as debt and so for every asset held by one person there must be a counterbalancing liability held by someone else. As we run large current account deficits which reduce our savings potential and bank lending cannot create net savings then only government budget deficits can provide any net savings for households. Also there is the paradox of thrift to consider as what is sensible for the individual becomes damaging if we all undertake it as one persons spending is another persons income. https://theconversation.com/how-government-deficits-fund-private-saving…
My late father was a car dealer. He was often amazed that he'd sell a very nice vehicle to a customer and they'd bring it back 18 months later - filthy -with food wrappers scattered around, chipped paintwork, disgusting carpet, and the upholstery a mess.
Of course he'd adjust the trade-in price accordingly and the customer would go into more debt to buy another vehicle. Consumer debt, one way to lose a fortune.
The car salesmen would have a quick scout around the vehicle, because there was often money under the seats or other items the customer had forgotten about.
“for the first time in my life, I am wondering where all my hard earned money has gone. Why aren’t we wealthy?”
One could suggest therein lies the problem although it's an example without context. Assuming he/she is healthy, has a home, maybe a family, has supportive friends to socialise with (obviously they do), has options in their earning capacity, activities they enjoy, then they are wealthy. This is the mindset issue, believing they are not already wealthy.
This would then suggest the real issue is the taught concept of "wealth" imposed on everyone. Given everyone is literally programmed in the first 7 years, probably up to 18, and we are bombarded by defined images and narratives of worth, success, getting rich, it's easy to understand that many don't know their true values, do not learn self worth. Money is just a tool and we've over valued it.
The real answer to aligning and living your values is knowing your why, and ideally it can't come from fear, scarcity or ego. Unfortunately our current system is built on these values and most of us are simply following the herd.
Imagine if we learned true values like cooperation, reciprocity, kindness, generosity, non violence, internal self worth, communication, intimacy, unconditional love for all beings, empathy and compassion, we might actually realise a truer sense of humanity where everybody is wealthy. Imagine if we had higher values than earning money.
What a spot-on comment, M. The world is filled with billions of people who can most likely only dream of having a fraction of the possessions and money this person probably owns, yet he/she feels, ..what? Unwealthy? Poor? Kind of sad, really.
When John D. Rockefeller (the richest person in the US) was asked by a reporter “How much is enough?” he allegedly responded, “Just a little bit more.”
I suspect the world has more than enough 'stinking rich' people who will never have enough. People who wear nice warm clothes in winter, shoes, live in houses, send their kids to school wearing clean uniforms and never go to bed hungry, yet wonder why they aren't wealthy.
And I'm probably one of them, let's be honest. Here's to us striving to realise "a truer sense of humanity" where we have "higher values than earning money". I like that. A lot.
Go for a drive around South Auck and you'll soon see why many are poor and destined to stay that way. Derelict houses, wrecked cars on the lawn, out-of-control kids.
I bought a house at a mortgagee auction many years ago that was inhabited by those kind of lowlives. It was absolutely disgusting - full of fleas, the toilet so filthy it had to be dumped, holes cut in the floor and walls, derelict vehicles out the back, I won't bore you with it all.
My comment was not about those who are poor (not in money and possessions, anyway - and yes, I've worked in South Auckland for a couple of years), but OK. I'll add to it..
The world is filled with billions of people who can most likely only dream of having a fraction of the possessions and money this person probably owns. Do those poor people deserve to be poor? Some of them, yes.
And do rich people deserve to be rich? Some of them, yes.
Anyway, would you rather be a 'poor' person who does not consider yourself poor? Or someone who owns far above and beyond what the vast majority of people on earth could dream of, yet complain about your lot in life and about being 'not wealthy'?
Who's complaining? I've just been reading about prisoners working at prison farms in NZ. It seems a very large percentage of them have never had a job in their lives.
No wonder many kiwis are poor. I keep reading about how so many want to tax the 'rich' and give it to the poor, but many poor make such appalling financial decisions that it's just a fact that many are destined to be poor and stay that way.
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