I've been thinking a lot lately about the way people handle money. Habits between those who struggle financially and others who seem to have it all figured out are just amazing. Recently, something got to me: the idea that our financial success is more about our philosophy than the actual amount of money we earn. This straightforward idea can change everything in our lives.
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First, there is the "philosophy of the poor." It is the concept where all money that comes in is spent, and then we try to save or invest whatever happens to be left, usually not much. It is easily understandable why this may be the case. Life is expensive, and the immediacy of needs and wants can quickly eat up our income. Such an approach might get a person stuck in financial ups and downs. When those unexpected expenses crop up, there is no cushion to fall back on.
The "philosophy of the rich" is about turning this habit upside down. Wealthy people invest their money first, then spend what's left. It doesn't mean billions or millions to begin with, it means giving precedence to the investments and letting whatever money remains cover the expenses. This helps in creating a safety net and growing the money over time. It is a financial management style that is proactive, concentrating on future growth instead of instant gratification.
What blew my mind is that it works no matter how much money a person has. It had nothing to do with having a huge salary or hitting the lottery. It is all about making the decision to invest first, no matter how little. This one habit can eventually build wealth over time. Knowing we can all do something about our financial future, by only readjusting specific priorities is enormous.
I've started doing all this myself. It wasn't easy at first. Old habits die hard, and I was used to thinking about what I needed or wanted right now. I started setting aside a portion of my investment income before paying any bills or buying anything. First of all, though, I wanted to ensure I was okay, I'd built a small emergency fund. Once I hit that, I started throwing money into the lowest-risk type of available investment. It was weird at first, but soon it became a habit. The more I saw my investments grow, the more motivated I was to keep going.
Probably the biggest challenge was getting my mind to change about money. For a long, long time, I thought, "Man, I have got to make more money so that money can go out into anything." It isn't how much you make, it is precisely, how to manage what you have. So, making this mental change has been immense. Putting first the investments started helping me to view and treat money not as something just to spend, but rather as a way to build a safer future.
I had come to know how the philosophy lessened my financial stress. Knowing that I had at any time investments and a growing safety net made me feel in control of my money. Seeing the money at work for me, and not just working for my money, was very reassuring. Indeed, peace of mind is invaluable and can improve your well-being in general.