We were with a group of friends recently and among the topics that got thrashed around was (besides the Sevens, the cricket and a bit of music) 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 become wealthy (what ever wealth means to you)?
What steps are you taking each day to progress yourself towards becoming wealthy? 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 finance. 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 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 what ever 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.