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Money 103: Setting Goals & Budgeting
The perceived demographic of a typical millionaire is entirely false
Late 20’s to mid 30’s without children
- If any children, the adult children are heavily dependent on parental support
Makes a very high income from a professional trade or art
Works 60+ hours a week or less than 30
Later-generation affluent, usually as an heir
Drives the newest cars and has many expensive hobbies
Statistically, most millionaires fit a specific profile
In late 50’s and married with three children
- Adult children are economically self-sufficient
Self-employed in a practical business that supplies needs for people
- Typically not retired
- Works 45-55 hours a week
- Skillful at targeting opportunities in a market
- Adequately well-educated, usually with a college degree
- First-generation affluent
- Allocates time, energy and money efficiently in ways that are effective in building wealth
Has a high net worth, but acquired slowly over time
- Invests about 20% of income
- Median household income of $131,000
- Average net worth of 3.7 million
- Owns a home worth approximately $350,000
Lives well below their means
- Buys older-model automobiles rather than leases
- Attended public schools, but likely to send children to private school
- Still clips coupons and looks for discounts
- Lives in a way that doesn’t show their wealth
Anyone with the determination to change can become a millionaire
Be focused
In some ways, the amount of money you have is a direct measurement of how much value you have added to others’ lives
There is a direct tie between being passionate and being financially successful
- This passion will show itself in lifestyle choices
- More on success later
If you have a burning desire to accomplish, you need to make significant sacrifices
Your sacrifices must be decisive and intentional
- Without making it a priority, it won’t happen in your consuming or in investing
- Say “no” to your present self and “yes” to your future self
- Stick to your standards or the planning and budgeting is a waste of time
- Never skip budgeting and never dismiss the numbers you’ve set for yourself
Be optimistic
“Get rich quick” is entirely possible, but is very difficult
You have to believe that you can attain your goals and that things will work out in the end
You must be optimistic and charming to keep essential people in your life who can help attain your financial goals
You must see the long-term gain as worth the short-term pain
Prayer does work, and God does listen
- Sales and windfalls can happen miraculously
- Miracles can also come in the form of improbable circumstances that avert catastrophes and hardships
Be realistic
Stay honest with yourself about your fears and beliefs about money
- You and only you are the means to acquire your wealth
Avoid overconfidence about vague financial plans or big unresearched decisions
If your health deteriorates as a result of your money habits, you won’t enjoy the effects of your frugal lifestyle
Small numbers don’t make millionaires, especially when saving pennies can sabotage opportunities
Be tenacious
Learn to hate debt, hate instant gratification, love saving money, love investing, and love to give money away
Wealth isn’t an event; it is a process
- Building wealth is a marathon, not a sprint
- It takes persistence to attain high financial goals
Spend less time dreaming about the future and more time working towards it
Proper money management can only come from confidence and fearlessness about your decisions
To acquire wealth, you must go on the offensive and not be strictly defensive about risks
Fight against materialism
Materialism is a lousy measurement of success
The more content and happy you are, the easier it is to save money
- Gratitude is scientifically linked to better spending habits
- Happiness is a choice, not a financial decision
Become a producer instead of merely a consumer
Learn to live below your means and how to be frugal
- Avoid “small purchases” or things you feel you “deserve”
- Look at a small recurring expense based on how it will play out in 10 or 20 years instead of moment-by-moment
- If you have to think about whether you can afford it, you can’t
Your frugality should work to expand your means by investing into something that is certain to profit
- When handled correctly, money yields money
Be prepared for high-risk investing
- Only the rich use interest returns for income and more investing
- Everyone else has to use their built-up capital to attain wealth
Fight against peer pressure
Stop following “conventional” wisdom about wealth
- Conventional people aren’t wealthy, meaning their wealth tips are worthless
It’s easy to get distracted by your friends’ or family’s lifestyles, especially when it’s a fun distraction
You can’t compare your lifestyle to anyone else’s, but it’s easy to think it can
You need to be committed to your goals, regardless of what others think
- It’s easy to be overwhelmed if you care deeply about appearances
- Have pre-planned responses to what others will say when they see your lifestyle
- Your family and friends may make fun of you for your drastic lifestyle changes
Be flexible
If you aren’t open-minded, you’ll miss out on many opportunities
Change from being a consumer to being a producer
Stay constantly vigilant for new ways to learn and apply what you’ve learned
Be disciplined
Maintain your habits until they become automatic impulses
Live by guidelines instead of by rigid rules, since you are still human
Work hard in both your career and spending habits
- Net worth is the measurement of wealth, and high income isn’t high net worth
- Many doctors and attorneys live paycheck-to-paycheck from bad spending habits
Avoid the cyclical trap of serving your lifestyle
- An active job creates income
- That income inspires a lifestyle
- The lifestyle creates financial obligations
- The obligations make working necessary
- Get a higher-paying job and repeat
Managing money is managing life, and therefore investing in your personal development is one of the best investments you can make
- If you’re reading this, you’re investing time into your development, so you’re already on the right path
