Is there a secret to wealth that you may not be aware of? Perhaps this is the question that frequently pop up in the mind of the average person on the street. An honest answer to that question is a definite yes. A millionaire is a totally different breed from the rest of the population. They have a different mindset about money, the value of money and how money can be made.
One of the idea this people subscribe to is that money is just a number, a tool and a vehicle that will take them to discover even more money. They are not obsessed with the things money can buy them, but the way money can be used to generate more money before they even think of using them for pleasure. This is known as delayed gratification, something that the general public is doing – backwards. In short, in order to think like millionaire, you must have a high desire to make money while keeping a moderate living to enable you to invest more. You must be also willing to put your spending and luxury dreams on hold in order to gain the most returns.
The same applies to their attitude towards taxes and interest rate. Smart millionaires know when to roll their profits from investment to get more returns before they actually pay their taxes, like a ‘deferred tax’ system. But then again, they also have access to very talented financial people to help them make financial decisions and to work around the tax system. This is another difference about millionaires. They use the money to buy other peoples’ time to make more money as they can only work so many hours in a day. This is known as leveraging.
Leveraging can also be carried out in the form of investments that millionaire set themselves up for. The average families have one or two properties in their name, if they are lucky. Millionaires have as many properties as their cash flow will allow, as they know that these properties can more than pay for themselves in the future. In fact, many rich people owe their fortune to real estate and land investment.
By saying that millionaires have strong priorities about what their money should be doing to earn them more cash, it doesn’t mean that they are debt-free. Rich people have no qualms about borrowing money and being in debt like most of us. The only difference here is that millionaires consider their debts to be ‘good debts’ since the money will go into investments when on the other hand, our parents have always taught us from young that debts are bad.
While the rest of the world is worrying about not working hard enough for their money, millionaires are always working smart knowing that they cannot get rich by working hard. They are really good at creating stream after stream of income that will continue to support them without them having to work at it after some time. These include rents from their many properties, dividend from their shares as well as other types of investments.
A common similarity in all millionaires is they are very careful about spending money. While their mind think big, they are very savvy when spending. After all, all self-made millionaires need to save in order to invest when they first started out. They are also risk-takers that are brave enough to make major financial decisions that can make or break their fortune. Their perspective on money enable them to detach themselves from the fear of losing them in bad investment decisions to cash in on higher risk investments and business venture that most people are too afraid to touch.
Budgets Can Expose Some Cold Hard Home Truths
Doing a budget can be the simple solution to rectifying a challenging financial situation but few people do a budget because it exposes spending habits which they prefer to keep hidden. Many people do not want to change their habits despite it costing them an arm and a leg.
There are two parts to a budget.
Your income and your spending. Your income can be wages from a job, profit from a business, or income from investments.
Your spending covers everything which is costing you money.
In short if it makes you money it is income and if it costs you money it is spending.
If you can do some simple maths you will soon discover whether you are left with a surplus or a deficit. If you have a surplus and you are in debt, use the money to pay off your debt.
If you do not have any debts you can use some or all of your surplus for one or more of your goals; this could be saving for a holiday, saving for a house deposit, saving for a car, or investing it in the share market. There are so many places to invest your money these days that if you did your homework you will find an appropriate investment for your circumstances.
If you have a deficit you need to take some kind of action rather than bury your head in the sand and do nothing because if you do nothing your financial situation will worsen.
There are two things you can do to balance the books;
1. Reduce spending
2. Increase your income
I don’t know how financially literate you are but if you do not understand financial jargon then I advise you to see a financial advisor to discuss your situation. The public library will have information on where to find a budget advisor.
A budget advisor is unable to help you unless you are completely honest about where your money is going.
It is up to you to make the decision on which sacrifices you are prepared to make. No one else can make that decision for you.
Your spending can be placed in two categories, your needs and your wants. You may be able to reduce some of the money you spend on your needs but it is the money you spend on your wants which you may find easier to eliminate.
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