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9 Harmful Money Beliefs You Should Avoid To Get Richer

9 Harmful Money Beliefs You Should Avoid To Get Richer

Whether we know it or not, sometimes we hold onto beliefs that can actually inhibit our ability to make money. I’ve been guilty of some of the thought patterns explored below, and once I learned to face and negate them, greater income sources opened up to me.

See if you, too, harbor any of these bad money beliefs.

1. “Only certain people get rich.”

Maybe you grew up in a family that experienced a serious lack of funds and deep down believe it’ll always be that way, as if you somehow inherited “poorness” like a disease. Well, I’m here to tell you that it’s faulty to think that only people such as Oprah or Bill Gates were intended to be blessed with large sums of money. Even Ms. Winfrey was poor once, and if richness can happen to her, it can happen to just about anyone. Why not create a $1 million business this weekend?

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2. “There are no jobs out there.”

Buying into doom and gloom job reports give some people an excuse to give up their search for employment. As author James Altucher notes, however, millionaires learn to look for hidden opportunities and make their own entrepreneurial moves. Get inspired by this guy who left Google to sell brain pills.

3. “Giving income away will make me lose cash.”

It seems logical that if you have $500 and give away $100 to help a family in need, you’d only have $400 left over. Conversely, if you choose to keep that $500 and skip helping the people whose light may have pricked your heart, common math would tell you that you’d still have $500 for yourself. But life doesn’t work in logical ways; it works mysteriously and circuitously, whereby you may find that opening the door to being charitable comes back to you in fabulous ways.

4. “It’s a zero-sum game – to win, somebody has to lose.”

Simply because one person gains $1 million doesn’t mean that another person has lost out. Instead of viewing money as a big pie whereby those with larger slices are cheating those with slivers, Bill Gates once spoke of a concept called “the creation of wealth,” whereby companies like Microsoft generated funding that wouldn’t have been there otherwise. I view it almost as money being printed out of thin air instead of funds being stolen via some “the rich get richer and poor get poorer” idea.

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5. “Impoverished people are holier, less selfish, etc.”

Yes, we’ve had great examples of folks who’ve walked this Earth that intentionally lived in poverty and focused more on non-material attributes. But that doesn’t mean doing so makes us saints. You can be just as effective by having money and using it in altruistic ways to help others, instead of taking a vow of poverty if your life isn’t meant to duplicate that direction.

6. “Wealthy people are jerks.”

Some rich people are full of themselves. Some rich people are kind and caring. Certain disadvantaged members of the public are lovely, whilst others are cruel. Money in and of itself is merely a tool. Having a lot of it only magnifies a person’s true character. Great wealth doesn’t create character.

7. “I’ll hit the lottery one day.”

Out of all the major lessons I remember from the popular book titled The Millionaire Next Door, the one that sticks out is that millionaires don’t always look like the flashy Rolls Royce driving folks we see in the movies. That’s because some of them plod away at doing all the non-glamorous things it can take to get rich: driving older cars, living beneath our means, etc.

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As long as we’re solely waiting for some sweet Powerball-winning day to make us rich, it kind of takes the onus off of getting there the hard way. Like one stockbroker told me, “Continue on with your get-rich-quick plan, and in the meantime, save money as well.”

8. “I’d better lower my prices/salary in order to gain sales/clients.”

If you’re trying to get rich through your business, there could be times when you’re tempted to cut your hourly rate or the prices of your products or services in order to make ends meet. This could be a great business move – after all, the marketing term “loss leader” wasn’t invented for nothing.

However, if you’re constantly undercutting your own value just because you’re afraid of losing clients or due to fears that what you bring to the table is not good enough to compete with others, it could be more symptomatic of deeper issues.

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A graphic artist who provides high-quality image editing might decide that her level of expertise and skills are worth $50 per hour. If clients looking for a cheap deal try to talk her down to $10 per  hour and she accepts, the artist may discover that she’s effectively lowered her annual salary below the poverty level. Instead of kowtowing to cheap clients out of anxiety, it would be better to politely decline and move on to others that are more than willing to pay higher rates for quality work.

9. “My business has to be shady to make money.”

The talk of the Internet recently was about a New York-area hotel that had the gall to charge people $500 for any negative reviews posted about them on sites like Yelp. Setting aside the fact that the practice might actually be illegal, most readers agreed that instead of threatening guests with fines for negative reviews, the hotel should actually do their best to provide positive customer experiences and gain great reviews naturally.

Amazon is king when it comes to “the customer is always right” theory. They even allow consumers to return Kindle books within seven days if they don’t like them – one of the many ways the online retailing giant has won the trust of goo-gobs of people that love to fork over their credit and debit card numbers to “The Everything Store,” as goes their motto.

Businesses and leaders who adopt the same thought-process – that is, harboring quality customer relationship management training, honesty and good ethics – are the ones that stand a greater chance of making their owners and employees rich. Those firms and folks that believe they must adhere to shady, confusing practices that rely on trickery to make a lot of money are the ones that will burn out like a shooting star streaking across the night sky.

Featured photo credit: Dollars in Wallet via static2.bigstockphoto.com

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Last Updated on September 2, 2020

How to Set Financial Goals and Actually Meet Them

How to Set Financial Goals and Actually Meet Them

Personal finances can push anyone to the point of extreme anxiety and worry. Easier said than done, planning finances is not an egg meant for everyone’s basket. That’s why most of us are often living pay check to pay check. But did anyone tell you that it is actually not a tough task to meet your financial goals?

In this article, we will explore ways to set financial goals and actually meet them with ease.

4 Steps to Setting Financial Goals

Though setting financial goals might seem to be a daunting task, if one has the will and clarity of thought, it is rather easy. Try using these steps to get you started.

1. Be Clear About the Objectives

Any goal without a clear objective is nothing more than a pipe dream, and this couldn’t be more true for financial matters.

It is often said that savings is nothing but deferred consumption. Therefore, if you are saving today, then you should be crystal clear about what it’s for. It could be anything, including your child’s education, retirement, marriage, that dream vacation, fancy car, etc.

Once the objective is clear, put a monetary value to that objective and the time frame. The important point at this step of goal setting is to list all the objectives that you foresee in the future and put a value to each.

2. Keep Goals Realistic

It’s good to be an optimistic person but being a Pollyanna is not desirable. Similarly, while it might be a good thing to keep your financial goals a bit aggressive, going beyond what you can realistically achieve will definitely hurt your chances of making meaningful progress.

It’s important that you keep your goals realistic, as it will help you stay the course and keep you motivated throughout the journey.

3. Account for Inflation

Ronald Reagan once said: “Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hitman.” This quote sums up what inflation could do your financial goals.

Therefore, account for inflation[1] whenever you are putting a monetary value to a financial objective that is far into the future.

For example, if one of your financial goal is your son’s college education, which is 15 years from now, then inflation would increase the monetary burden by more than 50% if inflation is a mere 3%. Always account for this to avoid falling short of your goals.

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4. Short Term Vs Long Term

Just like every calorie is not the same, the approach to achieving every financial goal will not be the same. It’s important to bifurcate goals into short-term and long-term.

As a rule of thumb, any financial goal that is due in next 3 years should be termed as a short-term goal. Any longer duration goals are to be classified as long-term goals. This bifurcation of goals into short-term vs long-term will help in choosing the right investment instrument to achieve them.

By now, you should be ready with your list of financial goals. Now, it’s time to go all out and achieve them.

How to Achieve Your Financial Goals

Whenever we talk about chasing any financial goal, it is usually a two-step process:

  • Ensuring healthy savings
  • Making smart investments

You will need to save enough and invest those savings wisely so that they grow over a period of time to help you achieve goals.

Ensuring Healthy Savings

Self-realization is the best form of realization, and unless you decide what your current financial position is, you aren’t heading anywhere.

This is the focal point from where you start your journey of achieving financial goals.

1. Track Expenses

The first and the foremost thing to be done is to track your spending. Use any of the expense tracking mobile apps to record your expenses. Once you start doing it diligently, you will be surprised by how small expenses add up to a sizable amount.

Also categorize those expenses into different buckets so that you know which bucket is eating most of your pay check. This record keeping will pave the way for cutting down on un-wanted expenses and pumping up your savings rate.

If you’re not sure where to start when tracking expenses, this article may be able to help.

2. Pay Yourself First

Generally, savings come after all the expenses have been taken care of. This is a classic mistake when setting financial goals. We pay ourselves last!

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Ideally, this should be planned upside down. We should be paying ourselves first and then to the world, i.e. we should be taking out the planned saving amount first and manage all the expenses from the rest.

The best way to actually implement this is to put the savings on automatic mode, i.e. money flowing automatically into different financial instruments (mutual funds, retirement accounts, etc) every month.

Taking the automatic route will help release some control and compel us to manage what’s left, increasing the savings rate.

3. Make a Plan and Vow to Stick With It

Learning to create a budget is the best way to get around the uncertainty that financial plans always pose. Decide in advance how spending has to be organized

Nowadays, several money management apps can help you do this automatically.

At first, you may not be able to stick to your plans completely, but don’t let that become a reason why you stop budgeting entirely.

Make use of technology solutions you like. Explore options and alternatives that let you make use of the available wallet options, and choose the one that suits you the most. In time, you will get accustomed to making use of these solutions.

You will find that they make it simpler for you to follow your plan, which would have been difficult otherwise.

4. Make Savings a Habit and Not a Goal

In the book Nudge, authors Richard Thaler and Cass Sunstein advocate that, in order to achieve any goal, it should be broken down into habits since habits are more intuitive for people to adapt to.

Make savings a habit rather than a goal. While it might seem to be counterintuitive to many, there are some deft ways of doing it. For example:

  • Always eat out (if at all) during weekdays rather than weekends. Weekends are more expensive.
  • If you are a travel buff, try to travel during off-season. You’ll spend significantly less.
  • If you go shopping, always look out for coupons and see where can you get the best deal.

The key point is to imbibe the action that results in savings rather than on the savings itself, which is the outcome. Focusing on the outcome will bring out the feeling of sacrifice, which will be harder to sustain over a period of time.

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5. Talk About It

Sticking to the saving schedule (to achieve financial goals) is not an easy journey. There will be many distractions from those who are not aligned with your mission.

Therefore, in order to stay the course, surround yourself with people who are also on the same bandwagon. Daily discussions with them will keep you motivated to move forward.

6. Maintain a Journal

For some people, writing helps a great deal in making sure that they achieve what they plan.

If you are one of them, maintain a proper journal, where you write down your goals and also jot down the extent to which you managed to meet them. This will help you in reviewing how far you have come and which goals you have met.

When you have a written commitment on paper, you are going to feel more energized to follow the plan and stick to it. Moreover, it is going to be a lot easier for you to track your progress.

Making Smart Investments

Savings by themselves don’t take anyone too far. However, savings, when invested wisely, can do wonders.

1. Consult a Financial Advisor

Investment doesn’t come naturally to most of us, so it’s wise to consult a financial advisor.

Talk to him/her about your financial goals and savings, and then seek advice for the best investment instruments to achieve your goals.

2. Choose Your Investment Instrument Wisely

Though your financial advisor will suggest the best investment instruments, it doesn’t hurt to know a bit about the common ones, like a savings account, Roth IRA, and others.

Just like “no one is born a criminal,” no investment instrument is bad or good. It is the application of that instrument that makes all the difference[2].

As a general rule, for all your short-term financial goals, choose an investment instrument that has debt nature, for example fixed deposits, debt mutual funds, etc. The reason for going for debt instruments is that chances of capital loss is less compared to equity instruments.

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3. Compounding Is the Eighth Wonder

Einstein once remarked about compounding:

“Compound interest is the eighth wonder of the world. He who understands it, earns it… He who doesn’t… Pays it.”

Use compound interest when setting financial goals

    Make friends with this wonder kid. The sooner you become friends with it, the quicker you will reach closer to your financial goals.

    Start saving early so that time is on your side to help you bear the fruits of compounding.

    4. Measure, Measure, Measure

    All of us do good when it comes to earning more per month but fail miserably when it comes to measuring the investments and taking stock of how our investments are doing.

    If we don’t measure progress at the right times, we are shooting in the dark. We won’t know if our saving rate is appropriate or not, whether the financial advisor is doing a decent job, or whether we are moving closer to our target.

    Measure everything. If you can’t measure it all yourself, ask your financial advisor to do it for you. But do it!

    The Bottom Line

    Managing your extra money to achieve your short and long-term financial goals

    and live a debt-free life is doable for anyone who is willing to put in the time and effort. Use the tips above to get you started on your path to setting financial goals.

    More Tips on Financial Goals

    Featured photo credit: Micheile Henderson via unsplash.com

    Reference

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