Life sucks when you have to worry about money all the time.
You know the feeling as the bills pile up. The rapid heartbeats, the anxious thoughts swirling in your head, the sleepless nights, the disconnect from the present moment, the quarrel with your significant other…All because of money. Almost everyone wants more money. We want to be financially free so that we can live life with peace, joy and contentment.
However, lots of people have preconceived notions or beliefs about money that hold them back from the financial freedom. These beliefs are usually unknown to these people who hold them.
To change a behavior or belief, you must first become aware of them.
I was reading The Latte Factor written by David Bach and John David Mann a few days ago when I came across these myths of money. I think they are worth sharing.
MYTH #1: Make more money and you’ll be rich.
Many would think making more money is their problem. However, making more money is not necessarily the solution. Many only make more money and then only to spend them.
Imagine a boat at sea. When the tide rises, the boat rises with it too. Your income is like the tide and your spending like the boat rises when the tide rise. In other words, as your income increase, your spending will most likely increase too.
Why? It is because we usually have money habits in place that keeps us from financial freedom. Our problem is not really more money but better money habits. No amount of money will save if you have bad spending habits. We have heard of the lottery winner or footballer or musician who goes broke after a few years. And we marvel at such. We might even fancy that if we were such people’s shoes, we would be wiser. But that is self-deception.
If you don’t acquire the necessary financial discipline and knowledge to earn, keep and grow money, you will still end up broke! It takes skill to become financially free; one that our traditional educational system doesn’t teach.
MYTH #2: It takes money to make money
I was a bit confused when I read this myth. From a personal experience, I know you need to have some money in hand to start a business or make an investment. So Myth #2 might seem like divorced from reality. I pondered it for a while and I realized that there is truth in the saying if understood in the right context. As we saw from Myth #1, a lot of people have bad money habits in place. Money that should have been used to secure one’s financial future is wasted by bad spending habits.
What we need is not more money but the wisdom to put into good use the money we already have. We are richer than we think; only we don’t realize it. Think about it: if you could recall all the money you have wasted on things you don’t need all these years, wouldn’t you have enough to invest to secure your financial future? I confess that looking back, I have regrets in this area. I wish I had known what I know now. But as it is said, “It is never too late to become what you might have been.”
Albert Einstein called Compound Interest the eighth wonder of the world. He says, “He who understands it, earns it. He, who doesn’t, pays it.”
You could also call the Compound Interest, the Compound Effect or the Compound Principle. It is a principle that is as sure as gravity.
Supposing you were given a choice between taking $3 million cash this very instant and a single penny that doubles in value every day for 31 days, which would you choose?
If you have heard of the Penny Gambit before, you know you should choose the single penny that doubles every day. But why is it difficult to make that choice that leads to greater wealth? It is difficult because it takes so much longer to see the pay off.
Assume there is a race that last for 31 days between Person A who takes $3 million dollar hard cash and Person B who takes the single penny that doubles every day. Who wins? Well, the result is not that obvious—at least not immediately.
On day 5, Person A has his $3 million while Person B has just 16 cents.
On day 10, it is $3 million vs. $5.12. How do you think Person B is feeling now? Person A is spending and enjoying his $3 million.
On day 20, Person A still has his $3 million and Person B now has $5,243. How do you think Person B is feeling now with all his sacrifice and hard work? Perhaps, he feels disappointed not to have caught up yet.
On day 29, Person A still got his $3 million while Person B has around $2.7 million.
It is only until day 30 of this 31-day race that Person B pulls ahead with $5.3 milllion.
And on the very last day of this 31-day marathon, Person B finally emerges the winner with $10,737,418.24 against the $3 million of Person A.
Thus, we see how small smart choices accumulate over time to create radical difference.
If you eliminate unnecessary spending, you can save money that can be invested to yield fortunes in the years to come. If you had made a good investment ten years ago, you would be closer to freedom today. Search and make research about good investment that can secure your financial future.
Financial freedom takes time. The key to financial freedom is start early and invest more.
Myth #3 Someone else will take care of you
I quote Barbara abundantly from the book I mentioned earlier. She really makes a good point on this issue. She says:
“Not that people actually say this out loud; because most don’t—but they’re saying it with their choices and behavior. ‘My boyfriend, my husband, my father, my financial advisor, takes care of my finances.’ Or: ‘Oh, it’ll all take care of itself.’ I’ve got news for you: No he doesn’t, and no it won’t.”The Latte Factor, David Bach and John David Mann
She further says:
“Your wealth is exactly like your health. Your health doesn’t just happen. It’s not something that takes care of itself as you go through life. You can’t leave your health in someone else’s hands, and the same goes for your wealth. They’re both completely in your hands. No one else’s.”The Latte Factor, David Bach and John David Mann
It is even more important for women to secure to become financially free. As women in today’s world, you need to take financial freedom even more seriously than men because:
- Women on the average still earn less than men in today’s world.
- Women spend on the average of about 10 years out of work to care for children and elderly parents.
- Women need more time. Women especially mothers handling a lot of responsibilities: taking care of children, doing the household chores and then juggling all of that with work. At the end of the day, you are exhausted. And you have no free time for yourself. Little wonder lots of marriages are on the rocks today!
- Women tend to live about 7 years longer than men. Meaning majority of women will live as widows with husband financial support. I can tell you that as a widow with no financial security, it can be very nasty especially in our African context. A lot of widows live and die poor.
- Many marriages end in divorces, leaving many women to cater for themselves financially.
As a women, (and men too) you need to avoid dependency.
Your financial future is in your hands
You can take that small step towards financial freedom today knowing that the Compound Effect will work in your favor as sure as the day and night. Make the decision not waste money no matter how small it might be. That small discipline will spill over and have a ripple effect over your finances.
I strongly believe we are meant to live life of abundance. Let’s begin.
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