How to think and become rich & wealthy

Seriously! Being poor is a frame of mind, if you can change the way you think about money then you will become rich and wealthy eventually. After reading The Richest Man in Babylon by George Samuel Clason it became very clear to me that if I could change my habits I could change my life.

Unfortunately personal finance is not a subject which is taught in school, there is no course on how to manage money and become rich, we learn from our parents and friends and manage our money accordingly.

Depending on what our parents teach us we could become incredibly wealthy or incredibly poor. If I could go back in time and give myself some advice just when I was starting off financially I would hammer home seven points that would make a tremendous difference to anyone’s lives.

#1: Pay Yourself First
Define Saving Money to Yourself

You earn your money through your own sweat and tears, you wake up early every morning doing something that you might hate to earn money, when you’re compensated with your earnings or salary it’s only just that you pay yourself first before you consider any other expenses.

If you don’t want to work forever then you need to get into the habit of paying yourself first, the more you pay yourself first the quicker you can stop working if you choose too. Just having the choice of not having to work is a liberating experience that unleashes even more creative energy to achieve better and greater things.

Advice to Self: Don’t be an fool, Pay yourself first no matter what

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#2: Spend Less Than You Earn
How to Save Money and Spend Less

This point caused some controversy in the book Richest Man in Babylon, budgeting like then makes people feel that they are giving away their freedom and right to spend. What these financially illiterate people fail to understand is that by giving up a small freedom now you are unleashing a greater freedom in the future.

With credit cards readily available it’s even easier to spend more than you earn, if you are doing this then you are robbing yourself of a brighter future. Instant gratification does not last long and it’s better to focus on the long run.

Advice to Self: Don’t show off with money, cut that credit card up and spend less than you earn!

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#3: Protect Your Wealth
Wealth & Estate Planning

When your savings start to rise more and more people start to covet, they assume that they know what is best for your money and offer whimsical advice on how to invest your money.

These people are would be washed up investors who have probably lost a lot of money and are looking for a way to redeem themselves. Often these investments come with great returns in short periods of time.

Greed overcomes reason and you hand your money over only never to see it again. Beware of con men and people offering whimsical investment advice. Always consider where the advice comes from and then think to yourself whether they are an expert in that field, if not tell them to get lost in the nicest possible way. Plan how to divide your estate and wealth to avoid future disputes because you will become wealthy.

Advice to Self: If it’s too good to be true it usually is!

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#4: Invest Your Money Wisely
Investing in Stock and Bonds is Easy When You Know

Most ignorant people consider investing risky; they have been programmed this way by people who cannot manage money properly. It’s true that every investment has a risk but you have the means to assess that risk. Always consider risk and return, look for investments that offer a reasonable rate of return and study the plan in detail before you hand any money over. Become an expert in a particular investment like stocks and bonds and then seek another expert or professional mentor to guide you through the process. The more knowledgeable you become the more able you’ll be when it comes to investments.

Advice to Self: If you don’t understand it learn it, don’t just hand your money over a promise of return as so many things can go wrong.

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#5: Make Provisions for the Future
Get Retirement Investment Advice

A state pension should be the cherry on the cake, not the cake. It will almost be impossible to have a satisfactory standard of living on a pension the state provides and as such you need to take matters into your own hand.

When you pay yourself first make sure you allocate a certain amount to your retirement and get your company to match your contribution through an IRA, 401k or Roth IRA. Only foolish people turn away free money, don’t give yourself the chance to look back from the future to curse your past self. Maximize your contribution and don’t refuse free money.

Advice to Self: You will get old you fool, put something away and get others to put some away for you too.

#6: Live well but live frugally
How to Live Frugally in Retirement and Before Retirement

Don’t try to keep up with the Jones’s; it’s a recipe for disaster. Always look for the best deal and consciously look for ways to lower your expenditures and avoid anything that takes money out of your pocket. Know the difference between an asset and a liability and cut your liabilities and increase your assets.

Frugal difference makes a tremendous difference to your wealth over time, I’ve been practicing frugality and my surplus income has gone through the roof. If you can practice frugality before retirement then you’ll have more to retire with, practicing frugality during retirement will mean you can leave more to your loved ones.

Advice to Self: Do you really need it? Do you really want to deny yourself in the future?

#7: Increase Your Income through Creative Ingenuity

Your brain is your greatest asset so train it well so it can serve you well. Train your brain creatively to look for opportunities. Many people just don’t get ahead because they fail to see opportunity that’s right in front of them. Avoid being fearful by truly believing in your judgement and then pursue your dreams relentlessly and don’t give up at the first hurdle. Look to double your income every year and then save as much money as you can.

Advice to Self: Don’t let negative people hold you back, immerse yourself among positive people and great things will happen.

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