What I’m doing to become wealthy like the top 1%
We all want to be rich and we all know what money is capable of. I’m not going to convince you to love money because chances are you already do if you are reading this.
In this story, I’ll be super clear and I’ll go straight to the point. I’ll share basic stuff that I do consistently and beliefs rooted well within myself, which have allowed me to be in a position of full control over my financial situation.
I’m not a millionaire, nor a rich man. I’m probably someone like you, who has an income, has several expenses just tries to build wealth while having a quality life.
So don’t expect get-rich-quick tips. These don’t exist.
Personal Finance 101
Before getting into the cool stuff, we need to have the basics covered. These are really obvious but they are the foundation of building wealth:
You won’t get wealthy if your income doesn’t cover all your expenses. Subtract your monthly expenses (debts included) from your monthly income (MonthlyIncome-MonthlyExpenses) and, if that number is negative, things need to change.
Investing is the path to wealth. Just saving will make us lose money year after year due to inflation. We need to have money saved, yes, but also money invested to compensate the inflation and potentially increase our wealth.
Reducing your expenses will keep you away from poverty, but increasing your income is what’s going to make you rich. Ideally, you want the combination of both — both are necessary to have a wealthy life.
These three points are key. Make sure you understand them properly because being aware of them is what will make your financial decisions wiser.
Let’s get now into my habits and tips that have allowed me to be responsible for my financial situation.
1. Track Your Money Movements
Gurus and blog posts usually recommend tracking expenses, but I’m taking it one step further.
I’m proposing to track all kinds of money movement: incomes, expenses, investments… Why? It offers a more general and realistic vision, compared to just tracking your expenses.
If you earn $10k/month and your expenses are $2k/month, sure you can try to reduce them. But let me tell you that you don’t have to. You have already an $8000 profit out there. Whereas if your income is just $2000/month, then you better lower your expenses while also trying to maximize your income.
It’s all about perspective.
By tracking how much money you make, how much you spend, how and where you spend it, how many income sources you have, how your investments fluctuate… You’re getting invaluable information that you can use to optimize your situation.
For this, I recommend using a spreadsheet. I have personally been tracking all this and more since October 2017 and it’s now amazing to see how it started vs how it’s going because that’s another nice feature: plotting stuff and literally seeing your wealth grow.
Not to self-promote but I actually decided to sell my spreadsheet on Etsy at an affordable price for everyone to use and take advantage of tracking one’s money movements. Here’s the link:
Ultimate Financial Tracker Spreadsheet Template for Google – Etsy
The Ultimate Financial Tracker is a spreadsheet that allows you to control your finances in a single place. You don’t…
2. Don’t Think of Money as a Zero-Sum Game
This is not a habit, but a mindset.
Money is abundant and you are not withheld from it. You just need to make it come to you.
But you don’t have to think of money as a competitive game where, if your friend wins, you lose (meaning you won’t be able to earn as much). That’s not how it is. There’s plenty of money for you both.
The moment you let go of this fierce competition where you think money is scarce, you’ll start to see things differently. Your mood will change because you will no longer think that something’s being taken away from you.
3. What Matters Is Your Free Time
We work 8 hours — the lucky ones — 5 days a week and those are unnegotiable. We have to pay for our house, our car, food… That’s why we work at a job that we don’t care about.
But it’s during your free time that you are indeed free. And with that power comes great responsibility.
Let’s suppose the case of two team members, John and Louis, who work in a fashion company. Both are software engineers, both are seniors and both earn the same. In fact, they earn a really good amount of money (I’ll let you choose the number).
Both John and Louis are single and they live alone. However, their lives couldn’t be more different.
John eats every day in the restaurants around the office because he doesn’t like to cook. Apart from that, during his afternoons, he either goes shopping because he likes fashion, or he remains at home staring at his phone’s screen. He has a good social life so he’s out for dinner a lot of times.
Certainly, John lives pretty well.
On the other hand, Louis lives a more frugal life. He’s comfortable with it so not spending more is actually not a sacrifice for him. He likes to cook and does it whenever he can, but he also likes going out with friends.
He spends his afternoons doing sports, reading and coding as well because he has some ongoing projects on the side.
While both have the exact same job, Louis’ income is 50% higher than John’s. Why? Because of Louis’ side project. Spending 3–4 hours each day on it allows Louis to make a side income which is increasing month by month and it’s at the edge of being considered a real business.
But things do not end here. It’s not just that Louis’ income is 50% higher than John’s, but Loui’s overall monthly savings double John’s. Why now? Because to that extra income, the lowered expenses add up as well.
And that’s all due to the decisions both take during their free time.
So my tips here are:
Use your free time to build side incomes: passive or non-passive, the more the better. Diversifying is key.
Don’t use your free time to spend all you earn during your busy time (if your goal is to end up wealthy over time).
4. Don’t Be Afraid To Spend
I’ve talked about controlling one’s expenses and reducing them, yes. But don’t let yourself get to the point in which you are scared to spend.
The point at which you actually feel bad for spending money.
I’ve been there and it sucks. It keeps you from fully enjoying the experience you’re paying for.
The key is to be mindful, or wise, with your expenses. Do not overspend, but avoid underspending as well. Spend what you can afford and what you enjoy.
What I did to get away from this fear is something I recommend everyone do. It is creating different money buckets — in my case, different bank accounts — and provides a utility for each of them. I have:
One as an emergency fund.
One for investments.
One for “dreams” like a house, for example.
One for daily expenses.
It’s in this last one that I have all the money I allow myself to spend without feeling bad. By splitting my money across different categories and purposes, I’ve been able to avoid feeling bad for spending money.
In the end, the money in my daily expenses account is there to be spent. That’s what I’ve told myself.
But here’s an extra tip on expenses:
5. Aim for Experiences, Not Products
This is cliché and I’m sure I’m not discovering anything new here. But it’s important.
Your excitement for a new physical purchase will disappear after a short period of time in 99% of the products you buy.
You’ll get used to your new iPhone, your new shoes will eventually feel like the other 8 pairs of shoes you have, and your new AirPods will feel like the previous ones, but now with a different shape.
I must tell you it’s not your conscious self who is making the decision to buy this stuff. It’s dopamine taking control of your mind, trying to make you want more stuff you don’t need, and you’re letting yourself be fooled by it.
Nothing against you, it’s human nature. But that’s what happens within us unless we avoid complying with dopamine’s commands. The reality is that few of us really do.
However, spending on experiences is different. They make us feel a lot more, and those memories remain with us forever. We can relive those feelings by just revisiting our memories, and that’s priceless.
I’m not suggesting that you have to overspend on experiences but I instead suggest that, if you have to prioritize, avoid the physical stuff.
Taking control of your financial situation is really not that hard. It’s really simple math, willpower, and making informed decisions.
I hope you enjoyed this post but I also hope you had the chance to learn something new. I really wish we could all become more financially educated.
Contributed by Pol Marin
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