Thursday, February 26, 2009

Money Tips - My Definition of Rich

Money Tips - Well I thought that I offered some good advice with my earlier money tips posts, and thought that it was a good foundation to start with. If I had it to do over again I would start with this post. I want to address and share my definition of rich and how you can use it to reach your goals and develop a mindset that will be a catalyst to your success. This is hardly something I created on my own, but its what I subscribe to in my personal life based on all the experiences I have had, books I've read, etc. Keep an open mind with this and as always take it for what its worth and build your own beliefs.

I think that I am rich. How can this be you ask? You are in the military, you are only 26 years old, you haven't started your own business, you don't work on wall st, and you aren't on the cover of Forbes. Well its because I believe that these are symptoms or outcomes of being rich. I think being rich is a combination of your mentality and your action.

If I had to put it as simply as possible I would define being rich as "keeping more than you spend." Wow. Very anticlimactic. But think about it. If you keep more than you spend you are in essence rich. It then becomes a question of how rich are you.

This leads me to the mental aspect of being rich. Many people don't like to talk about money. In fact it is grouped right in with other touchy subjects that you aren't supposed to bring up around people who don't think exactly the way you do (religion, sex, politics, MONEY). I fall into this trap quite often. We don't even teach about money in our public education system! I think it is because people are thinking about money all wrong. It has been described as the root of all evil. You are viewed as shallow and vain if you quest money. I think its quite a paradox to think that way. Money affects everyone and we all need money to one degree or another, so why is it so taboo. I think that a lot of people project there insecurities and inadequacies towards money and those who have it.

I view money in a very different way. The statement "time is money" is one of the greatest quotes there is. We really only have one currency and that is our time on this earth. When you view money as a personal stock of time you will change how you think about it. I want more money so that I can choose how I spend the rest of my time on this planet. Your values are reflected in how you spend your time. That is why people who are drunk on money never find happiness. They are consumed by making more and more, and spending what they have on 'things'. I like nice things like the next guy, but I think the real joy would be spending more time with my family, seeing different parts of the world, giving back something to this earth that would stand the test of time, improving myself as a person. Can you see the difference between the two definitions of rich?

So if you and your current lifestyle were picked up and plopped on a deserted island, how long could you sustain your current lifestyle until you ran out of money? For example, if you spend roughly $30k in expenses a year and you have $30k in savings/investments then you are depending completely on future income; you have no real wealth. This is what most people do (or worse). If you had $120k in savings and investments you would be able to survive for about 4 years. As you can see, how rich you are quickly turns from money to time (real currency). I would say at this point I am about 1 year rich (my wife and I together = Team Badski). The more rich I become the more options and choices I have regarding my life.

So as I said before, being rich is merely a mentality coupled with the practice of keeping more than you spend. When you keep more than you spend it is only a matter of time until you reach your financial goals. How long it takes to reach your goals is the only unknown. That is why in my previous posts I encourage people to start saving/investing anything, even if it is 1% of your income. Then once you get comfortable with that amount you can ratchet it up to 5%. Or you can find ways to make more money which will adjust the percentage of your income you are saving. Once you get past the barrier of keeping more than you make the only way to go is up.

Change your mind and keep more than you spend, how rich you become is up to you.

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