Most people want more money. Those who don’t, probably would if they thought through it more.
Money buys time. Money buys freedom. Money buys peace of mind. These can all increase your chances of being happy.
Isn’t that what we are all after?
One main focus of this blog is MONEY.
- How to EARN IT
- How to SAVE IT
- How to INVEST & COMPOUND IT
The first and most important factor in getting financially independent is have the proper mindset. When thinking about money, there are two types of mindsets: Consumer Mindset and Owner Mindset.
If you want to make faster progress to financial freedom, you must change from a consumer mindset to a owner mindset.
Consumption is the opposite of saving and investing. Most people approach everyday life with a consumption mindset.
“I want to _____ because ______.” You fill in the blanks, but it all translates to “I want to consume that to make me feel better.”
It can be entertainment, food, fashion, gadgets, homes, vehicles, and the list goes on and on. The “thing” will make you feel better for a few seconds, minutes, hours, days, weeks, years but always short lived.
The financially illiterate do not understand the consequences of their consumption habits. Buying the latest phone, driving a vehicle that is more than your annual salary, a house that can only be afforded with a 30 year mortgage and dual incomes, etc.
Every company in the world is trying to get you to consume their product. They hire the best and brightest minds in the world to convince you to spend. It’s your job to combat this brainwashing with all the tools at your disposal. Fight like your life depends on it.
Avoid the consumption mindset by doing the following:
- Minimize entertainment that serves a lot of advertisements. This could be cable TV, most social media, magazines, etc.
- Stay away from free products that use your data to sell you things. It’s hard to completely eliminate it, but minimize it.
- Design your life and think of yourself as a simple person, spartan, or minimalist. Strong men can live on very little. Be one.
- Distinguish between needs and wants with brutal honesty. This doesn’t mean you can’t buy what you want, but be clear with it on your purchase.
- Be extremely careful when buying high priced products. When buying a car or house, keep to the necessities until you are financially free.
- Buy quality goods for the best value and care for them so you can use them for as long as possible. I take great pride in trying to get my iPhone to work for 4 or more years.
- Observe other peoples spending habits and how it affects them. No need to judge or preach, just observe. Learn from the good and bad.
Overcoming the consumption mindset is enough for most people to live a content and rich life. For those that are focused on achieving more financially, start thinking with an owner mindset.
An owner’s mindset focuses on revenue – expenses = profit.
Revenue is another word for income. An owner is mindset is focused on “How can I make more income?” There will be many more posts to come about earning more, but right now the focus is defining the mindset.
Almost anytime I interact with a business, my brain by default begins to ask a lot of questions.
- How much revenue is this producing?
- What are the expenses?
- How much is the owner making?
- What is the growth opportunity?
- Is this scaleable?
- What could be done better?
- What are they doing well?
- How is their marketing?
- Who is the competition?
- What are the barriers to entry?
- What the biggest challenges in running this business?
- How stressful is this?
- Who is the owner?
- How did the owner get into this business?
- Is the owner involved in other businesses?
- Can it be run passively?
- If it can’t be run passively, how much time is required?
- Do I want to be in the business of selling this to them? Almost every time, the answer is no, but still it is considered.
Most of the time, I don’t want to do this mental exercise, it just happens. These are the types of questions that will open your mind to all the options to earn more money.
Minimizing expenses wisely is important as well. A good owner always considers every cost carefully. Some costs may not warrant examining further and others do, regardless that is a conscious decision. Every expense has to be spent intentionally.
There is also opportunity costs, which are difficult to measure, but should be considered with deep thought.
To summarize, there are two types of mindsets. An consumer mindset and an owner mindset. There is a lot of outside pressure to keep you as a consumer but you must break free from this if you want to be financially free. Once you do, transitioning to a owner mindset will open up you mind to opportunities everywhere.