Millionaire mindset is critical for making money, getting rich and becoming a millionaire. To reach the financial freedom you want, you should develop a millionaire mindset. William Danko and Thomas Stanley explain this in The Millionaire Next Door. They say that the self-made millionaires live in average neighborhoods and drive used cars. Meaning, these people are cautious where they spend their money.
Besides, a tiny percentage buys boats, personal airplanes, recreational vehicles and go on expensive vacations. Stanley and Danko claim “there’re ones who look rich, and the ones who’re rich.” You should aim to be someone who is truly rich. And not someone who spends frivolously but have not much in the bank.
What Separates the Rich from the Poor?
Ask any person who is financially free, and they’ll tell you: it’s the mindset.
As surprising it may seem, rarely any wealthy person will tell you otherwise. They’re unlikely to say that they made their wealth from a big contract they nailed.
What most millionaires claim is the recipe for their success is having a millionaire mindset.
What? Yeah, you heard that right. Millionaires master one very crucial skill. It’s to train their minds to work for them.
Our mind has only one goal, and that is our survival. Hence it’ll fight to defend the status quo. Anything which is not normal is a likely threat. So, it’ll try to retract you from new learnings and opportunities. All of which are critical parts to become wealthy.
Develop a Millionaire Mindset
People who’re rich in a real sense develop the knack of growing rich slowly. And not hurrying to become wealthy. To ensure this, they’ve two rules as far as money is concerned.
Rule 1: Never lose money. Rule 2: if you’re tempted, go back to rule 1, don’t lose money.
Millionaires spend more time thinking about their money than poor people. An average adult invests 2-3 hours monthly thinking and studying for their money. Mostly at the time of bill payment. An average millionaire, spends 20-30 hours monthly studying, planning and thinking his finances. Such millionaire mentality will radically improve your decisions about your money. Rich people who do this tend to make better decisions and gain financial freedom.
Develop the Habits of Truly Rich People
Wealthy people develop many other financial mindsets to ensure they don’t lose money. They also focus on how to grow their money steadily over time. During the development of a millionaire mindset, one habit you should cultivate is to take sound financial advice. Make it a habit before you do anything concerning growing your account. Find a financial advisor, ask around. Find an advisor who has already attained financial freedom by investing his/her money in places he’s recommending you. The financial advisor you choose can play a critical role in making sound decisions.
Cultivate the habit of inspecting before investing in anything. You should spend the same amount of time checking an investment as you spend on earning money to invest.
Quick financial decisions are poor decisions. Develop the habit of moving slowly and taking your time. Find out every minute detail of the investment or business before writing the check.
Don’t come under any pressure when taking your investment decision. Never make yourself feel that an investment decision is urgent and taken in a hurry. A rich man once said, “investments are like buses, if one goes, there’s another coming along.”
At times, the best investment is one which you never make. Develop a habit of properly understanding the investment before you part with your money.
If you don’t understand any part, or it seems complicated, don’t invest there. As simple as that.
Habit 1: Millionaires Never Owe It to Luck
A crucial habit for financial success is being prepared for any risk. It’s incredible how people spend years collecting money and then lose it because they were not appropriately insured. Cultivate the habit of thinking about the worst possible scenario. It is what we refer to as “worst possible option” (WPO). Always ask “ what could be the worst thing that can happen in this event?”
Not everyone likes to pay for insurance. But, trust me it’s the wisest thing you can do on your path to financial freedom. By proper coverage, you’ll not be caught off guard by an unforeseen event or emergency. Another benefit of insurance is that it gives you peace of mind. This way you can focus more on things that matter.
Habit 2: Millionaires Cover Their Assets
When you start accumulating money, make it a habit to protect your assets from lawsuits and unwanted taxes. Use the services of a lawyer who has specialization in estate planning and wills. Create a family limited partnership under his/her direction. Transfer all your assets to this company, so they don’t come under seize through a lawsuit. Or taxed if anything happens to you. As they say, “a stitch in time saves nine.” Small actions like planning, inspecting and ensuring your assets can save you lots of money. And help you on your road to becoming financially free.
Habit 3: Do Your Research
Another essential habit which millionaires have is to consider every expense before making it carefully. This includes acquiring maximum information on the different costs involved in a financial decision. The ball is always in the court of someone who has the best information.
Make it a habit of negotiating to get lower prices while buying and higher prices while selling. A smart negotiator can gain or save 10-20% on each financial transaction. Even more! Every dollar you earn or save is extra money. You can put this money to grow in your financial account.
Make it a habit of asking for lower prices when buying. And, higher prices when selling. Ask for lower rates of interest. Also, demand better terms and conditions. Ask for deferred payment when purchasing, and immediate payment when selling. Do this repeatedly. Remember to be confident, courteous and pleasant. But, never be afraid of asking. Ask for all that you want. If you don’t get that ask for other things.
Habit 4: Get Financial Freedom
Most big fortunes take time to build. They’re made on the principle of compound interest. This is what Albert Einstein called the most prominent power in the whole universe. In 99% of cases of people becoming wealthy, it’s over a stretched time-period. Plus, it’s based on incremental and slow growth due to compound interest.
Each dollar you save, properly invest and insure, can grow 5-10% a year. As your money accumulates, it compounds and grows more. Stanely and Danko say, “it takes an average millionaire 22 years to gather a million dollars. This is from the point he becomes serious about his financial life. Most millionaires reach where they’re slowly. They do this by gradually developing their earning potential, saving more and investing intelligently. As a result, the money accumulates and compounds over time. You should also do the same.
Habit 5: Don’t Go by the Looks
Remember that becoming a millionaire has nothing to do with looking like a millionaire. Stanely and Danko claim that our the mental image of a millionaire is totally wrong. We imagine a millionaire to look like the hat and monocle-wearing person on Monopoly board.
In reality, millionaires are more likely to be economical and live by a budget. They don’t go beyond the means to fill a swimming pool with $100 notes. Most wealthy Americans drive used cars and live in modest homes. They don’t like to waste money on status symbols. What many ordinary people get wrong is the feeling that you should spend money to show their worth. Be it your emotional worth or net worth.
We remember meeting a retired couple whom we wanted to turn our clients. They were living in a modest home and very humble. The couple drove Lincolns. The lady was a retired school teacher and the husband spent his days in a tire factory. They both shared this fantastic trait of saving money. And boy did they save.
Before meeting me, they were not aware of their net worth. When we made their financial plan, they were shocked to know that they were millionaires.
If you’ve trouble differentiating the concept of wealth from the trappings of wealth, take your time. Think about why the status symbol matters to you. Who you want to impress with your expensive watch or a new car? Wouldn’t you prefer having money in the bank instead of a new Jaguar and an empty account?
Habit 6: Trust Yourself
Perception is the key difference between self-made millionaires and wage-earning people. Self-made millionaires tend to have an internal locus of control. The theory of locus of control focuses on how people see their ability to control their lives. People have either external or internal locus of control.
Those having internal locus see themselves in control of their lives. If such an individual invested money in a business which failed, they’d look at everything they could have done differently. And then they would pledge to learn something from the entire experience.
People have external locus, feel as if they’ve no control over things that happen to them. If they lose the same investment, they would think that luck didn’t favor them. They would think that they this failure couldn’t be prevented. This means that an external locus investor will stop trying if they fail in the first attempt. But, an internal locus investor would come back in the game with novel insights.
It could be challenging to change the locus from external to internal. Blaming fate for it is convenient. Because then you won’t have to keep trying if things go astray. But, if you want to become wealthy, you need to realize that only one who can take control is you.
Habit 7: Embrace Risk
Several years ago, a woman named Helen took a personal loan. She wanted to start her business. Her mother got very angry for the considerable risk she was taking. This is because Helen could easily take a monthly pay-check for her remaining life through her old job.
But today, Helen has become a multi-millionaire.
Helen and her mother symbolize the distinction between rich and scarce thinking. Yes, working behind the counter at Macy’s was a safe option. But Helen not only desired more money, but she also wanted something more in her life. By opening her business, she took this risk. One which not just paid off, but also helped her create both wealth and meaning.
It’s difficult to let go of the fear of the unexpected. What if something goes wrong. Keith Cameron Smith is the author is The Spiritual Millionaire. He suggests you ask three questions to yourself to overcome this fear:
“What’s the worst that may happen to you? What’s the best that may occur? And what’s possibly going to happen? If you ask these questions about seeing an opportunity, the answers will give you some insight. You think that the most likely thing to occur will bring you near your goals. And if the worst that can happen happens and you’re fine with it. This means you can live with the work and are ready to live through it. Go for it and take action.”
This fear is what we faced while starting our financial planning practice. We didn’t have any reason to go on our own. Our clients were satisfied. We were independent and could’ve run this blog but with enormous constraints. Although we knew we would be sacrificing lots of income, it was a risk we had to take. Without taking this risk, we couldn’t have achieved the growth we wanted.
Having scarcity thinking implies you think any risk is too much. This means you’ll never come to the point of creating wealth for yourself.
Habit 8: Pledge Yourself to Richness
It’s quite easy to wish for anything. Be it a better job, money or a better body. You may feel such half-hearted desires every day. But, do you know anyone who spends their time purchasing lottery tickets, and never attains their goals?
The point is, merely imagining a great life and not doing anything will not get you anywhere. You only wish a life away.
Millionaires know that you don’t just imagine things you want. You ought to commit to it. Wealthy people are committed to becoming and staying rich. They don’t just wish for it. Instead, they do what they imagine.
Committing to a target in writing makes it more likely that you reach where you want to. The act of writing your goal helps you understand your needs and desires. Besides, it also enables you to know how to attain it.
To grow the chances of goal attainment, listen to the psychology site PsyBlog.com. It suggests that you think of a positive vision first. A vision of the problem resolved. Then think about the other facets of the reality. The negative ones. Researchers said that this technique was the most effective in motivating people to make decisions.
When you make a formal commitment to wealth, it’s the first step in goal fruition. Every self-made millionaire knows this. Living without this engagement is an excellent way of staying confused about whatever happened to your dreams.
Attaining financial freedom by developing million-dollar habits is a big target. But, it’s not what we call the most important thing. It’s the change that you need to bring in yourself. The person that you need to become regarding persistence, character, courage, and thoughtfulness. When you become financially free over time, you will feel a sense of satisfaction within. And then you’ll be happy with all parts of your life. This is the most fulfilling goal.
Becoming wealthy is not easy. It demands discipline, hard-work and striking when the iron is hot. But, it also requires a change in mindset. If you start feeling like a millionaire now, you’ll be equipped to use the disciple when the opportunity strikes.
Some may name it luck. But, millionaires would call it the time they’ve been waiting for.