Many of the statements you regularly hear around the water cooler / coffee machine are just plain wrong and usually stem from ignorance.
I’ve been reading Influence the psycology of persuasion by Robert Cialdini recently and have learned a lot about the way we all work.
It’s a bit scary how easily we can be manipulated to do what the skilled persuader wants us to do.
One of the ways is also handicapping us in our day to day lives and tends to keep us in the income range we feel comfortable in rather than stepping up to the income we would prefer to have.
This is the area of social proof.
The idea is that when we are unsure about how to behave in a situation we look to those around us to see what they do and then we follow along because ‘if everyone else is doing it it must be right’.
What happens in group discussions about wealthy people is that, because we don’t believe that we can get there ourselves and we don’t see anyone around us getting wealthy then “they” must be different.
Since we are all nice people here “they” must be nasty, selfish, greedy people. This is not true of course, there are just as many nasty, selfish, greedy people who are not wealthy and there are just as many nice, selfless, generous people who are.
No, the real difference between wealthy people and those who are not is how they manage their money.
Would you believe that it’s not even a secret?
You can search all over the Internet, in your local library, talk to any qualified investment advisor or pretty much anyone who has a lot more money than you and they’ll all happily share with you what they do and how to do it.
Really simple steps. Get rid of the debt, live within your income, save a nest egg, invest in income producing assets, re-invest your earnings.
That’s pretty much it.
This information was even mentioned in Great Expectations written by Chales Dickens in 1860.
Well then, if this information has been around and publicly available since the 1800s then why aren’t more people wealthy?
There’s the rub.
Turns out that it’s not enough to know about this you also have to do something about it and that’s not so easy.
It’s even harder when all the advertising is telling you to buy now pay later, here is the latest wizz bang greatest thing since sliced bread and all your friends have one now so you had better catch up.
Credit is easy to get for almost anyone particularly for things you don’t even need and probably won’t use more than 2 -3 times.
The hard thing is to ignore all that crap and focus on getting your money where you want it to be. If you have credit card or store debt you need to get rid of that because it’s expensive debt to carry.
The other challenge as it turns out is that it takes time to build up assets to serious wealth and in the early years it doesn’t look like you’re gaining ground at all. You can find out how to work out this stuff on this site but an overview is that compounding interest on a savings account follows an exponential curve and takes approximately 14 years to really start to see the effect.
Interestingly it is the same regardless of where you put your money but most people give up after about 5 – 7 years and necer get to see compounding really kick in.
If they can remain disciplined everyone has the potential to retire a millionaire without anything but regular savings and safe investing.
But they wont.
They don’t have the discipline.
The only short cuts that I know of is to inherit a large amount of money or to win X-Lotto. Neither of these are classified as financial planning or reliable financial instruments so you can’t rely on them.
In general those people who do inherit or win don’t manage to keep it very long because they don’t know how to handle it.
What you can do is take control of your money starting today.
Every little bit of reduction in spending helps, every time you choose to not add to your debts helps, every little bit of additional payment on your debts helps.
You can do this, sit down, do a tally of all income and all expenditure, work out where you can cut down the expenditure and how you can accelerate the payment of your debts.
Are you ready to begin the path to financial security and perhaps even wealth?
Leave a comment below on how you are going to manage it and by when.