Many Britons ? everyday people working to build a comfortable life ? assume the “rich” have a magic formula or some sort of secret. It seems they know something about “how the world works” that the rest of us don’t.
If the average person could just figure it out, they’d be wealthy, too. They’d live with less stress, more time, and more money. And money, after all, gives you the freedom to do what you’d like to do. Money allows you to buy your freedom form the rat race.
What I found out from reading hundreds of books, studying countless articles and listening to numerous podcasts is that the rich do posses a secret ? more than one, in fact. And these secrets not only build wealth, they allow you to use it to live the life that you want to live.
Today, I’m going to share one of the most important secrets to building financial security. This is sort of a cheat sheet for those wanting to become wealthy. The steps to take are simple but by no means easy – nothing that?s worthwhile in life is ever easy.
Working to have financial security can benefit a lot of people, especially when the time comes for them to think about their retirement. Having enough money to be able to fund this time in their lives is something that most people think about years in advance. Some may even decide to buy gold and silver coins that they can place in an IRA so that they don’t have this concern anymore. This can provide them with financial security, regardless of what could happen. Companies similar to Lear Capital, (you can see some reviews at https://www.trustpilot.com/review/learcapital.com) can provide you with the different choices of precious metals so you have a further understanding of what they are worth in order to have a better chance at being financially secure. However, this is just one of the many different things that you can do.
The First step is to increase your savings rate. You need to curb your spending. If you continuously spend more than you earn you will never be wealthy no matter how much you earn. To find out your ideal savings rate, read my post on ?How Much To Save To Become Rich?.
Outside of a few things, spending rarely brings joy. Sometimes, spending money is simply necessary, like having to get new Tyres for your car, for example, or the weekly food shop in. Identify the things you truly enjoy spending money on, and forget the rest. Humans are notoriously terrible at predicting what will make them happy. “We expect the next house, the next car, the next pair of shoes or the next promotion to make us happy even though the last ones didn’t and even though others keep telling us that the next ones won’t,” Harvard psychologist Dan Gilbert explains in his book Stumbling on Happiness.
We get a nice warm fuzzy feeling when we buy a new television or pair of shoes. So we tend to search that feeling out. Retailers and advertisers have become adept at targeting it. But it’s short-lived. The thrill of these things wears off quickly. The possessions don’t change our lives in any way. A promotion at work may have a better chance of changing our lives, especially a promotion to a managerial position, although this could potentially work both ways. Being properly trained as a manager is the best way to easily transition to this new role. Taking a look at some of the tips over at somewhere like development-academy.co.uk/news-tips/new-managers-survival-guide-influencing-skills/ could help make your role as a manager easier to settle into.
By contrast, saving money and using it to increase your personal financial freedom does make lasting improvements to your well-being and quality of life. Money saved generates future income. Income is what sets you free. And freedom is what truly makes us happy.
But many people do the exact opposite of saving. They don’t just spend the money they have, they spend money they don’t have in pursuit of some unachievable happiness.
I know lots of people that like to keep up with the Joneses. The problem is, the Joneses are financially irresponsible. They’ve got too much house, cars on finance, and too much credit-card debt. If you try and keep up, you’ll get dragged down as well. A study published last year showed that 16m people in the UK have savings of less than ?100. Crazy. When you see someone who seems to live too well for the job he has, he doesn’t have a secret skill. He often has a secret pile of debt.
But you don’t have to become a monk. One benefit of wealth is having money to spend on a few things that bring you joy. For me, I don’t hold back when spending on food or travel. It’s different for each person. A good rule of thumb is to choose one or two things you truly enjoy spending money on. Then cut back to just the basics on everything else. When you learn to stop buying things that don’t make you happy, you’ll have the freedom to enjoy the things that do; like time or relaxation. All you need to do is give up the things that don’t make you happy in the first place.
I think everyone should start by socking away at least 5% of your monthly income. Try to bump that up to 10% and then 15% as you get comfortable with your new spending habits. Have a look at my article titled ?how much to save to become rich? for a guide on what savings rate you need to be looking at.
The key to saving isn’t about raising your income. It’s not about saving a penny here and a penny there. It’s about understanding yourself better and shaking all the frivolous desires from your mind.
Once you’ve got that down, you can set your money to work for you. You can use the money you have saved to buy even more money. Soon enough the money you?ve saved will take a life of its own and create your second more passive income.