In the 18th century, chess players lived by certain axioms, such as “control the center.” Games usually followed very similar patterns, as each player would try to quickly place pieces in the middle of the board.
But times changed, and some players began to dominate by correctly identifying which squares were the most important. Sometimes that meant fewer pieces in the middle, but with more mobility. Suddenly, the old wisdom was obsolete, but it still took years for the chess world to fully incorporate these new discoveries.
Similarly in finance, we have learned much wisdom recently that supplants the old ideas from the Great Depression. Phrases such as “Cash is King” don’t apply in today’s world of rising inflation.
So, here are some new nuggets of wisdom to help you reframe the role finances play in your life:
Becoming wealthy and staying wealthy are two different skills.
How are these two different?
To become wealthy, you need to amass a large amount of money. The skills to accomplish this might include an ability to find opportunities, an ability to take advantage of those opportunities, and an ability to stomach the risks involved. However, those same skills and habits could just as easily lead to losing wealth as gaining wealth.
For example, most people who win the lottery actually end up bankrupt within a few years. They became wealthy. But they didn’t stay wealthy.
Staying wealthy requires patience, an ability to delay gratification, and a level of caution to protect that wealth. This is the reason why Warren Buffett’s number one rule of investing is “Don’t lose money.” When focused on gaining and maintaining wealth, this rule becomes paramount.
Think of it this way: when you imagine being a millionaire, what does that look like? When most people think of being a millionaire, they’re actually thinking of spending a million dollars. However, if you spend a million dollars, you no longer have a million dollars.
It’s important to master both sides: master taking certain acceptable levels of risk to become wealthy, and protect your wealth along the way to stay wealthy.
Photo by Damir Spanic on Unsplash
Conflict over money is not the #1 cause of divorce. It’s the meaning you give to money.
Many divorced people say that finances were a major cause of their marriage falling apart. This is understandable, given how tense conversations about money might have been.
However, money alone doesn’t create, nor solve problems.
If lack of money were really the reason why couples broke up, why do so many couples in poor circumstances survive? Why do so many wealthy couples still break up with fights over their finances?
Money on its own only carries as much meaning as each person gives to it. For a couple on the ropes, money might come to represent their different goals, their different methods for achieving those goals.
If you desire financial success you must change from a consumer to owner of the economy. You do this by becoming an investor.
This piece of wisdom is the most difficult for Americans to grasp. The American Dream is built on the idea that if you simply work hard, you’ll be rewarded with financial success.
However, hard work alone does not lead to financial success. To achieve financial success it’s important to not only work hard, but for your money to also work hard. To do this, you must become an owner of the economy by owning businesses through stocks.
Do this, and your money will end up taking care of you enough so that you won’t even have to work if you don’t want to!
What other old systems of thought are still affecting how you approach finances?
If you’re ready to examine your financial habits and adapt them to today’s world, click here to sign up for a FREE Bronze Account. A licensed financial advisor will reach out for a complimentary 1-hour meeting to help you identify which of you habits will help you become and stay wealthy!