Making money is just as important as knowing how to manage it. People often think that the secret to being rich is to make a lot of money but what they are overlooking is that being rich means having a lot of money. Who is richer, someone who has made $40,000 per year for their entire life but lived frugally and invested wisely and now has a net worth of $2,000,000, or someone who makes $150,000 a year but spends all of it and has thousands in debt and $2,000 in the bank. This example should serve to demonstrate that making a lot of money does not make one rich.
One problem is that a lot of people want to appear rich. They will buy expensive clothing, lease expensive cars, and go to trendy places just so others can see them. These people are not rich, however. They often spend their entire paycheck on their car payments, their rent, and their clothes.
Ironically, rich people often don’t care about that kind of thing. Imagine you are worth $1,000,000. Would you care what other people thought about what car you drive? Of course not; you have $1,000,000 so you probably wouldn’t feel the need to impress other people.
The other reason rich people don’t care is because they are often frugal and have developed good habits with money. Just because you can go out and pay cash for a new luxury car doesn’t mean you should stop driving your 5 year old economy sedan (that you purchased used!).
Managing your money is perhaps the best skill you can learn if you want to be rich. This means learning to be frugal, learning to invest whether in stocks, mutual funds, or bonds, and not trying to keep up with the Joneses.
It can be difficult to start down this path, but there are a few good resources out there. Read the book “The Millionaire Next Door” to learn about the financial habits of millionaires and see just how frugal they really are. You’ll be surprised. Learn to invest. If you have a little extra money and want to be daring, learn to trade. Read Financial Trading School to learn about binary options. Stop buying stuff you don’t need, like a $4 coffee every morning. Get off of caffeine anyway, lazybones. Or at least drink tea instead. Pay yourself first. Contribute to your 401(k) at least as much as your employer will match, as that is essentially free money. Eventually you will develop these as habits and will start to realize that hey, it feels pretty good to save that $4 every morning that you used to spend on coffee; that’s $20 a week, and that’s $1,000 a year (assuming you take 2 weeks off for vacation). And how many years have you been doing that for?
These rules apply no matter how much you make, btw. Surely you’ve seen the stories about ex-athletes who were making millions who are now broke. They didn’t manage their money well and spent all of it instead. But it’s not their fault; they never learned how to be smart with their money. But now you’re on the right path.