Posts Tagged ‘Poor’

Most people view obtaining wealth and riches as the final goal in life. They feel that if they can get more money then they will be happier and have a more fulfilling life. That with a little extra money the worries will start to disappear and with a lot of money the worries will be gone. i don’t think this is the case. it all depends on how you view wealth and riches.

To me, wealth means freedom. As Robert Kiyosaki discussed in Rich Dad Poor Dad, wealth is measured in time. It is how long you can maintain the lifestyle you want without having to work. I agree with this. Working 40 hours a week, even if you like your job, takes away your freedom.

However, you don’t have to have a lot of money to be wealthy. You can also obtain wealth by reducing your costs and spending. The lower your average cost of living, and the greater your savings, the longer you can live wealthy outside of work. For Example, someone who makes $30,000 a year, and only has an average monthly cost of living (including expenses and spending income) of $1,500 would accumulate an average of 8 months of wealth (8 months maintaining current life style without working) each year. Someone earning $70,000 a year with an average monthly costs of $4000 would only accumulate an average wealth of 5.5 months after one year of working.

$1,500 X 12 months=$18,000 $30,000-$18,000=$12,000 $12,000/$1,500=8 Months

$4,000 X 12 months=$48,000 $70,000-$48,000=$22,000 $22,000/$4,000=5.5 Months

One of the biggest reasons why people never seem to be able to get a head is because there spending increases in proportion (or more) with their increase in earnings. When they get a raise, they buy a more expensive car, a bigger house, a bigger tv, get satellite, and eat out more often at expensive restaurants. No I am not saying that you should save every penny and give up having any fun. What I am recommending is that you decrease your spending overall, and never let your living costs increase by a larger or equal percentage than your increases in salary.

In part two I will cover 5 easy ways to increase your wealth and savings.

Could the ability to restrain yourself from eating one marshmallow make a difference between struggling through life and the ability to retire wealthy and early? Yes it can, according to a study done in the the 1960′s by Stanford University psychology researcher, Michael Mischel. The study tested 4-year old children’s ability to delay gratification. The researcher then placed a marshmallow in front of the child and gave him/her two options. The child could eat the marshmallow, or he/she could wait until the doctor came back from an errand and the child would receive two marshmallows. Only 1/3 of the children were able to wait until the researcher returned. I read the story in the book Influencer: The power to Change Anything (a book I would highly recommend by the way), but you can also find more details on the story here.

I know, it doesn’t really seem like a big deal right. Well, they followed these kids into their adulthood and it turned out that the children who were able to delay gratification and wait for the second marshmallow were more successful, had high paying jobs, and tended to be more happy people than the ones who choose to eat the marshmallow. Think about it. The ability to delay gratification means you can save and invest when others are spending money on various things they don’t really need, you can control what you eat, make yourself exercise, push yourself through school when others are partying. This one small behavior has the ability to completely change your life. I know, it is much harder than I make it sound. Luckily, according to the book, Influencer, this behavior can be learned. Since the two books have a lot of similar ideas, I would also encourage you to read Made to Stick.

However, in some cases it really is simple. Most people give up on investing and even saving because they feel it is too difficult. But put in the context of the marshmallow story, finance and investing is really not eating one marshmallow so you can have two. You don’t spend your money, put it in some type of investment, and then it becomes more. The behavior that has to change is the “not spending” part. But, as i mentioned in an earlier post, it gets much easier once you get used to it.

Related articles

• one marshmallow, or two? – the marshmallow study, conducted in the 1960’s by stanford university psychology researcher michael mischel,. demonstrated how important self-discipline is to lifelong success. he started his longitudinal study by offering a group of …
• The Marshmellow Test – [Editor’s note: This is an op-ed by Perry Wu, chief executive of BitGravity, a content distribution company, a long-time entrepreneur and former venture capitalist.] I was up in the mountains this past weekend, watching the kids run …