Eliminate Debt and Increase Wealth by Changing How You Think About Money
We live in a society that values consumption and debt over building wealth. From the time we're children until the day we die, we're bombarded with messages from the media and from our peers that to consume is good. In fact, the more you have, the more people seem to look up to you. Who didn't admire the girl in school with the designer clothes or the guy with the expensive car? Weren't they usually the most popular kids? I used to believe that if I worked hard and had a good job, I too could have all of those things that we admire as a society. I wanted a nice house, a new car, great clothes, and fancy vacations. The funny thing is, once I started working and could actually afford some of these things, I realized that owning things isn't the key to happiness for me. Instead, influenced by books such as "Your Money or Your Life," and "The Millionaire Next Door," I changed my attitude towards money. I'm finally out of debt (except for my mortgage) and am starting to accumulate wealth for the first time in my life. My goal is financial independence. It took me many years to get to this point. I only wish I would have learned all this when I was in my twenties.
A very surprising description of who is a millionaire in America.
This book changed forever how I think about money.
Money is Not for Consumption It's For Freedom
My biggest change in attitude about money was shifting from the belief that I need to earn more and more money to buy all of the things that I thought would make me happy to the belief that money buys freedom. What do I mean by freedom? Well, if you have money saved, you have a bit of freedom from the need to work or from the fear of being told you don't have a job anymore. Think about it, if you're sitting on a nest egg that will support you for a year or two, how concerned would you be about getting laid off? Wouldn't you start to think differently about your job? You might start to think that you'll keep working because you want to not because you need to. That subtle shift in attitude can make a big difference in your attitude towards your work and in your day-to-day happiness.
When I started looking at money as a way to buy freedom, I stopped spending on things I don't need, which leads me to my second attitude shift.
Living Small and Saving Money is Key
I decided that since buying lots of things wasn't making me happy, I should just stop doing it. Instead, saving money became my new path to satisfaction. I knew that if I built up a nest egg, I could earn the freedom I discussed above. But instead of just going for the freedom from worry of layoffs, I'm going for complete financial freedom or the ability to live on one's wealth. This may seem like a lofty goal and I agree that it's daunting. However, I know that if I live small, the amount of wealth I need to accumulate to support myself will be commensurately smaller as well. So living well below my income level has two benefits. I can save more and I need to save less!
Some might think that living small requires too many sacrifices but I disagree. There are so many ways to enjoy life on a small budget. Also, I've already experienced the lack of satisfaction from material possessions. This is just one of the mental shifts you'll need to make to get out of debt and build wealth. To me, those goals will bring far more satisfaction than buying a new purse.
How Can I Earn Passive Income?
If I'm going to live on earning from savings, I need to earn a decent return. I started to look into investment options that generate steady income and settled on Treasury Bonds and Dividend Stocks. Each of these investment options pays out a check at periodic intervals. What could be better? Until I'm ready to retire, I plan to reinvest these payments. The power of compounding will allow them to grow even faster. However, I also plan to continue adding to these investments. In the past, I didn't think this way. I would put my money in a savings account that pays little to no interest or wonder what the next big growth stock is. Growth stocks are hit or miss though. You never know which one will actually take off.
My new attitudes towards money have already started to make a difference in my life. I don't worry as much about it and I feel more at ease at work. I know that this isn't a get rich quick system but instead it will require a lifestyle change and patience over time. But that's okay because at least I'm on the right path. Even if it takes me twenty years to reach my goal, it'll be worth it.
- Why Your Retirement Savings May Be Enough After All
Financial planners usually advise their clients to plan to need 80% of their pre-retirement income in retirement. New research conducted by the National Bureau of Economic Research challenges that assumption. They say that focusing on consumption in
- Surefire Tips for How to Reduce Your Living Expenses
In order to cut your living expenses, you need to know what you're spending now. That's why tracking your expenses is so important. Learn how to track and analyze your expenses to save more money and build wealth.
- 5 Steps for How to Achieve Financial Independence
Financial independence or financial freedom is possible, even on a smaller income. These five steps and discipline will make it a reality. Get out of debt, reduce your living expenses, invest your money, and get ready to retire.
- Investing for Income: How to Set Up a Dividend Stock...
Investing in dividend stocks is a great way to earn a higher return on your investments. Anyone can do it, even the smallest investor. As dividends are reinvested back into the companies you own, your wealth will grow.
- Investing for Income: How to Buy Treasury Bonds
Treasury bonds are one of the safest investments around yet many people don't understand them or know where to purchase them. This article will provide details on what a Treasury bond is, will provide definitions for common bond terms, and will provi
More by this Author
- 15Why Your Retirement Savings May Be Enough After All: How to Retire with Less Money Than You Think You Need
Most people want to know whether or not they've saved enough to retire. Financial planners routinely recommend saving enough to replace 80% of pre-retirement income. New research conducted by the National Bureau of...
College students need to watch every penny. Using these 71 college discounts on everying from travel to technology to food and clothing will help you stay on budget.
Is it possible to generate enough income to quit your nine-to-five job? The answer is yes, if you follow this plan to cut your expenses, pay down your debts, and generate passive income.