The Big 3 Financial MythUnderstandings To Lose In The New Year

It’s hard to know whose financial advice to take. Neither Grandma’s hidden-in-the-mattress savings plan nor your best friend’s “you only live once” approach to burning through money sound like a surefire way to build a solid financial safety net, or to build wealth. Many of us have “MythUnderstandings” about money that hinder our ability to grow our nest eggs successfully. MythUnderstandings are commonly held ideas that are, in fact, false and widely misunderstood. When it comes to money, we have even more to deal with: we need to examine the myths that we tell ourselves about what we can do financially, and then we must go on a journey to unlearn the myths about investing itself.

By revisiting The Millionaire Real Estate Investor, we’ll show you how some of the ways you are looking at yourself financially are unfounded and guide you through their corresponding financial truths. Once your mindset is right, you can begin the journey to becoming financially wealthy.

Myth: I Can Become Financially Wealthy Through My Job Alone.

Truth: Your Job Is Not Your Financial Wealth, You Need to Invest.

All too often, we have high hopes that when we’re ready to retire or stop working, we’ll be riding off into the sunset with a padded savings account and full 401K. After all, we did the “right” thing and paid into them for years. Unfortunately, it’s unlikely that our jobs will provide us with enough income and generated savings to accomplish real financial wealth.

Financial wealth means having enough unearned income to finance your life mission without the need to work. Sure, if we are a Superbowl-winning professional athlete, a Hollywood A-lister, or a CEO, our jobs may accomplish that. But, as the following figure shows, income without additional investment often doesn’t really build wealth. At best, it can only maintain the value it has when earned.

But for those of us that aren’t Elon Musk, there are things we can do to build our wealth, even if we aren’t earning multi-million-dollar paychecks. One key thing we can do is be committed to understanding where our money is going. As we say in The Millionaire Real Estate Investor, “no matter how you make your money or how much you make, if you don’t take an active role in your financial planning and money management, you’re at grave risk of seeing your investments underperform or, worse, be lost.” In other words, take care of your money. By holding your finances accountable, you’ll be able to create the wiggle room necessary to start investing.

Start by paying attention. Track your spending. Create a budget. Then, commit to spending less than you typically do. Whether it’s as simple as eating at restaurants less frequently or something more involved like renegotiating your insurance premiums and other monthly bills. Don’t get caught up in what your neighbors or friends are spending and doing. To build wealth faster, you’ll likely have to consume less than your peers.

The most important thing to keep in mind is the sooner you reach a place where you can start investing your income, the sooner you’ll be able to build wealth.

Myth: I Can Be Happy With the Money I Have Now.

Truth: You Do Need And Want to Be Financially Wealthy.

You have no idea what you will need or want beyond today. Life is unpredictable. What seems to be a stable job or lucrative career could change overnight. Look to the service industry over the last year and a half of the pandemic as an example of massive challenges; the food sector alone is down almost a million jobs compared to before the pandemic began.

Wealth building isn’t necessarily about just having the money to suit your life in the present. Rather, wealth building is about preparing for the unplanned moments in your life. Should life hand you lemons, your financial options shouldn’t be automatically limited. If you take care to build your wealth above and beyond your income, you can have both active and passive money flow and an unlimited future earning potential.

Myth: I Already Know What My Financial Potential Is.

Truth: You Can’t Predict What You Can or Can’t Do Until You Try.

Too many of us base our financial potential on where we’ve come from and where we currently stand. But how does this benefit us? When we pinpoint the type of financial success we expect to have, we’re limiting our potential.

As we explore in The Millionaire Real Estate Investor, there are two types of wealth builders: those who think in terms of what’s probable, and those who think in terms of what they could possibly accomplish.

Note that the future thinkers aren’t using their current capabilities as a ceiling. Rather, they not only plan to, but expect to break through that ceiling and go on to accomplish bigger and better things. As we say in The One Thing, “Extraordinary results are rarely happenstance. They come from the choices we make and the actions we take.” This statement applies to wealth building in the same way it applies to our personal life choices.

The way that we see ourselves, the mindset we have about what’s possible — these can have the biggest effect on our ability to become truly financially wealthy. Learning to let go of our financial MythUnderstandings removes unconscious limitations that we may have placed on our wealth building journeys. It can be challenging to reframe our thinking in these ways, but the benefits can be life-changing.

What MythUnderstandings do you notice yourself falling prey to as you lay out your wealth-building goals for the year? Tell us your thoughts on our social media pages!