First, your daily habits have a great deal to do with your financial prospects. Some habits lift you up and help you build wealth, while others drag you down and could focus you in a poor house.
And second, there are four ways to wealth: the Saver-Investor Path, the Big Company Climber Path, the Virtuoso Path, and the Entrepreneur Path.
When you choose the way that is right for you and install what I call “Rich Habits” to boost you on your path, building wealth grows almost automatically. Conversely, if you choose a way that is not right for you, building wealth grows almost impossible.
The most common way people take to wealth? It’s the Saver-Investor Path, which has built more millionaires than any other. I’ve spent quite a bit of my time learning how the Saver-Investor Path works for my latest book, Effort-Less Wealth. What makes this path so special is that it is available to almost everyone. It needs no special set of skills or specific education. It doesn’t demand significant risk, long working hours, or isolation from friends and family.
There are just Some basic things you will need:
1) at least a middle-class income—it’s hard to save when you have to scrape by to cover the bills
2) Discipline
3) Consistency and
4) Time—the typical Saver-Investor in my Rich Habits study was at it for 32 years, but accumulated north of $3.2 million.
Those are the feature of a Saver-Investor millionaire. But they’re just the starting point. To leverage those traits.
Be frugal, not cheap.
Being frugal means spending your money wisely. Frugal spenders make a habit of buying a great quality product or service at the lowest price possible. They focus on quality first and cost later.
Cheap spending means buying the cheapest product or service, with little regard for quality. Cheap products break down after just a few years, forcing you to change them over and over again. Cheap services are typically provided by those who are either inexperienced in their field or who are not very good at what they do. This can result in mistakes that cost you money down the road.
Surround yourself with fellow Saver-Investors.
The Saver-Investors in my Rich Habits study intentionally surrounded themselves with friends who shared their savings mindset. Why is this important? Habits expand like a virus throughout your social network. If your inner circle Involves too many spenders, you will eventually grow infected by their spending habits and will be incapable to save.
Eliminate spontaneous spending.
Everyone has about three hours of willpower energy, and it is greatest after a good night’s sleep. When willpower is high, your prefrontal layer is in control of your brain. You make good decisions. When willpower is low, you lose self-control over your spending and other things.
This is why supermarkets place products at the checkout lines. Their hope is, in your exhausted state, you’ll make a casual purchase of a sugary soda, a bag of chips, or a tawdry tabloid.
The remedy is to do your shopping immediately upon waking up from a night’s sleep, after taking a nap, or after a light meal. These three things restore your willpower reserves.
Understand need vs. want.
People who underestimate their wants will surrender to immediate gratification, eschewing saving in order to buy things they crave right now: 8K TVs, glamorous vacations, expensive cars, bigger homes, and flashy jewelry.
Want-Spenders routinely obtain debt in order to finance their standard of living. They are inconsistent with their money and create their own poverty. They have been brainwashed by advertisers and a consumerist society to think that it is perfectly usual to buy in excess of their needs.
When Want-Spenders are no longer able to work due to old age, they live out the remainder of their lives in abject poverty, becoming dependent on others.
Avoid emotional purchases.
When you are feeling overly optimistic about your future income, you can fall into the trap of spending money you have or spending future money you hope to receive by earn debt.
When you feel sad or depressed, emotional purchases can act as a quick fix, temporarily lifting you out of sadness. The remedy is to be constantly vigilant regarding your emotions and look for healthier ways to address them.
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