Do you have a philosophy about wealth and financial security?
Sorry, that’s actually a trick question to make a point. Of course you have a philosophy about wealth building and financial security; everybody does. It’s just that most people don’t realize they’ve formulated one. So the better question would be…Do you know what your financial philosophy is? Here are a couple possible examples:
The “Wing and a Prayer” Philosophy
These are the people who live paycheck to paycheck. They use credit whenever it’s offered to them, financing instant gratification items like dining sets, HD TVs, and even going out to eat. When emergencies and other unexpected expenses arise, they’re forced to go deeper in debt. They probably don’t think they have a philosophy, but of course they certainly do. (And the soundtrack is a certain Bon Jovi song.) These people aren’t broke; they would need to first get out of debt just to qualify for being broke.
The Coupon Commando Philosophy
These are the people who scrimp on everything and believe price haggling should be an Olympic sport. They zealously chase coupons and discounts and will dedicate an hour of their life to saving $20 on a purchase. These folks eschew luxuries, regarding them almost as an obscenity. (“$200 for a massage!!! I could use that money to grout the tile in the bathroom!”) People who follow this philosophy live from fear-based, poverty consciousness. As a result, many of them are broke or poor, because they’re focused on economizing instead of building wealth. Some of them however, actually possess a lot of money and are wealthy. But I wouldn’t consider them prosperous, because they don’t live in joy and harmony.
I believe these two examples above describe the philosophy of at least 90 percent of the world’s population. And you probably won’t be surprised to learn that I believe they both are terrible philosophies to live by. Which, as clever readers have already deduced…leads us into part six of our series on the key philosophies that determine your worldview – and the results that worldview produces for you. In case you’re just jumping in, here’s the premise we’re operating on:
There are seven major, life-defining philosophies you develop about prosperity – these seven philosophies determine your worldview – and this resulting worldview regulates the level of prosperity you will experience.
Every day you believe you’re making decisions that affect your prosperity. But if you’re like most people, you’re not making most of these decisions mindfully. Because what you decide in these situational decisions has already been predetermined by the philosophies you developed. (I believe these seven areas are the ones that you make the big decisions that impact your prosperity the most.) They are:
If Covey was here, he’d implore us to “begin with the end in mind.” Allow me to suggest the end you want to have in mind. You need to…
Get the money thing out of the way.
In other words, you must create money security. A state where you know your survival necessities of food, shelter, medical care, transportation, and BTS concert tickets are taken care of. You want to get the money thing out of the way so you can filter your decisions through lifestyle, not survival needs. You should never have to choose between buying medicine over groceries or paying the rent versus getting your teeth fixed. Money security means your basic living costs are covered and you have no anxiety over them. That’s step one, and you want to accomplish it as quickly as possible.
If you’re in this situation, this is when it may be prudent to cut back on regular expenses. Think of your necessary monthly expenditures the way companies view their “burn rate.” Their burn rate is the regular, ongoing costs for payroll, taxes, rent, etc. There are no profits until there is more money coming in than the burn rate is leaking out. You might need to live without Disney+, a weekly manicure, or upgrading your iPhone just now. If you’re in debt, you want to slash your burn rate as much as possible, to facilitate getting to a position of money security, so you can make other decisions moving forward based on prosperity consciousness, not poverty consciousness.
Now, things get really sexy, because you get to determine a financial philosophy to ground all of your money-based decisions on. You graduate from survival mode to wealth-building mode and begin the journey from money security to money freedom.
For the first time ever, I’m going to publicly share my own financial philosophy, in the hopes it may help you with yours. This philosophy may seem simple upon the surface, but the results it produces are deeply profound. Here it is…
You want to wake up every morning wealthier than when you went to sleep the night before.
When you’re doing that, you’re on a vicious cycle of wealth building. It means you’ve exceeded your burn rate and have money and/or other assets working for you, even while you sleep. It also means you’ve mastered the concept of leverage and have transcended the “trading hours for money” trap.
You can probably see how having that philosophy guides my life and dramatically influences every decision I make money-wise: whether saving, spending, or investing. And you can see how adopting this philosophy will impact all of your money decisions as well. In terms of practical application, you implement this philosophy by how you answer the following question:
Do you work for money, or does money work for you?
Full stop. End of story. Drop the mic.
That is the single biggest differentiation between poor people and wealthy people. There are no absolutes, but the vast majority of the time, you will discover that most poor people work for money and most wealthy people have money working for them. (I spoke more about this in that part four post on leverage.)
When you make the decision that your primary method for creating wealth is having money work for you, you start a cascading effect that makes many of the later decisions for you. For example, once you’ve made this decision, you’ll never have to question whether you should spend your whole paycheck or devote some to investing. That answer is already apparent. You don’t have to sweat whether to reward yourself with that $200 massage if you already know that your other money is working generating enough income to cover that purchase. You start thinking in a different context. You won’t see saving as a sacrifice, but instead, as an exciting opportunity to build more wealth and move closer to money freedom.
I’m not an investment advisor and have no desire to become one. But I do think I might do a follow up post later on ways I put my money to work. It’s a fun topic and I receive lots of questions about that. But there are plenty of great investment books out there already. The bigger issue is developing your core philosophy. Once you get that right, the individual decisions about earning, spending and investing pretty much fall into place. You stop making decisions from fear and start making them on how they enhance your life and the greater good. And that is living prosperously.
Next post, we’ll conclude the series, looking at your philosophy around purpose. Until then, would love to see your thoughts below.