Developing a millionaire mindset is necessary to achieve the financial freedom lifestyle you have been dreaming about all your life. In the book The Millionaire Next Door, authors Thomas Stanley and William Danko explained that most self-made millionaires and wealthy people drive used cars, live in average neighborhoods, wear average-priced attires and watches.
Generally, they are careful and prudent with their money, even after they have attained great wealth. They seldom buy boats, personal planes, or invest in extravagant vacations. As Stanley and Danko pointed out, there are broke people who look rich, and ordinary people who are rich.
There are those who look rich, and those who are rich.
The Trap of Affluenza
If you have been following the financial news, you may have came across the term affluenza which was the buzz word few years back. According to Investopedia, affluenza is a social condition arising to be more wealthy, successful or to “keep up with the Joneses”.
To put it simply, it is the culture that prides itself in possessions and financial success. It’s not hard to get affected at all, considering the focus of mainstream media these days. Income inequality. One-percenters. The wealth gap. Affluent lifestyle of celebrities. Unless you have been living under a rock or avoid network news like a plague, you are more than likely to come across these news every single day.
Now, is it really so bad wanting to “keep up with the Joneses”? It all depends on your life priority and the amount of control you have. The keywords are control and moderation. If you abandon the important things in life (such as family and happiness) in a blind pursuit of possessions and material, you are doing it wrong.
It’s a Matter of Control
Truly wealthy people develop not only their financial wealth, but also their emotional and spiritual wealth. They are in control of every aspect of their life, and this is what leads them to being a successful person. They understand that financial wealth is just a tool to help them achieve freedom in life, and they are not a slave to possessions and material desires.
So, what do you need to achieve true wealth? The right money mindset, along the financially savvy habits to go with it seems to be the answer. Truly wealthy people develop the habit of “getting rich slow” instead of “getting rich quick”. They believe in building long term assets and not making reckless investments in the hope of hitting a jackpot.
They have two rules with regard to money. Rule 1: Don’t lose money investing in something you don’t fully understand. Rule 2: If you ever feel tempted, refer back to rule 1 and do your due diligence to find out more. Make it a habit to thoroughly understand an investment before you ever think of parting with your hard-earned money.
“They have taken the time to work successfully with money, and as a result, they are the captain of their ship”, says Jaime Tardy, author of “The Eventual Millionaire”. “On the other hand, if you approach your finances from a place of fear and ignorance, you will be like a boat floating around the ocean with a motor”.
Don’t Rush Into Decisions
Fast financial decisions are usually poor financial decisions. This applies not only to investments, but to purchases as well. Develop the habit of taking your time to think through an investment or a purchase and make comparisons. Never allow anyone to pressure you into an investment or a purchase.
Want to buy that new gorgeous Ultra HD smart TV? Don’t rush into it. Give yourself 3 days to think about it and if you really need it. Make comparisons to see if you can get a better deal. Consider cheaper alternatives and your financial standing to see if you can really afford it.
Tempted to buy a new car? Same thing, don’t rush into it. Mull over the idea for a week. Allow yourself more time to consider your decision the bigger the purchase is. A lot of times, purchases are done on impulse and are unnecessary. The more you splurge the further away you are from financial freedom.
Live Life In Moderation
Now, some people might think: “If I’m putting so many restrictions on myself, am I ever going to enjoy life and buy what I want?” The answer is short and simple – You will, but there is a time for that. If what you want in life is a sports car and a high-end residence, you can. But not after you have achieved true wealth. Do not get into debts just to fund an extravagant lifestyle.
Most great fortunes are built slowly. They are based on the principle of compound interest, what Albert Einstein called the “greatest power in the universe”. Most wealthy people live life in moderation and get rich slowly, by gradually increasing their earning ability and investing carefully so it grows and compounds over the years.
Achieving financial independence as a result of developing good financial habits is an excellent goal in itself, but it is not the most important thing. It is the person you have become, in terms of persistence and modesty, as well as the importance you put in other aspects of life. And THAT is what being wealthy truly is.