The Millennial generation has been brainwashed into thinking that in order to become rich, it needs to look rich. This is a huge farce that a lot of us have to admit we participate in.
But the fault isn’t entirely our own. We’re influenced to “stunt” instead of save by the music we listen to, the television shows we watch and the celebrity status we emulate. These all reinforce the ideal that we need to give off a rich vibe to hopefully one day attract the same either through an employment opportunity or personal relationship.
What we forget though, is that saving is the real key to creating wealth.
We’re all guilty of living beyond our means. How many of us live in apartments that take more than a half of our monthly income? Or how many of us eat out every night when we know that cooking at home is a cheaper route?
I’m not trying to point any fingers because I have to admit I’m guilty of some, if not all of the things I mentioned above. Instead, I just want to spread awareness that if we underspend our income, we develop savings that can then be used to profitably invest when a great opportunity comes along.
So what does success look like? Maybe success looks like frugality?
I can’t think of anyone who came up without earning an income first. Billionaire investor Warren Buffett is a great example of someone who started with nothing and through strict saving and calculated investments, Buffett amassed $174,000 — or what would be the equivalent of $1.4 million today's — by the time he was 26.
From Buffett, we can learn the ideal that to build wealth, you need capital and then you can use the capital to invest and grow your money. But the way we get capital is through income and not spending all of it, which is saving.
Instead of simply sharing this obvious fact with you, I’m going to also give you some tips on how to jumpstart your savings, in order to get off the path of simply looking rich, and onto the path of actually becoming rich.
This following is a modified version of Warren Buffett’s 10 Ways To Get Rich:
1. Reinvest Your Profits:
In simple terms: When you first make money, don’t be tempted to spend it. Instead, reinvest the money you make, so you can get even more money. It’s important not to initially reward yourself by buying new pair of shoes or splurging on a night out. Use the new money you make and apply it towards investing in yourself even more.
2. Be Willing To Be Different:
Don’t listen to everyone else, or try to emulate what other people are doing. Buffett based his investment practice in Omaha instead of Wall Street, something that was completely odd back then and still is today. He also refused to share with others where he was investing money so that they couldn’t talk him out of what he was doing.
Of course people are going to say you’ll fail (haters) — and if you do fail, initially, that’s OK; it’s important to remain resilient. Instead of following the crowd, Buffett looked for undervalued investments and ended up vastly beating his goal (and the market average) every single year.
3. Never Suck Your Thumb:
It’s important that you make up your mind swiftly and act on it. Sitting around pondering a decision or waiting a long time to act can do more harm than good. That’s why you have to do your research ahead of time and get all the information you need to make a decision in advance.
Ask one friend or relative to make sure that you stick to your deadline and stay accountable. Buffett is famous for making decisions on the spot when people offer him a business or investment. He won’t talk unless they bring him a price though.
4. Spell Out The Deal Before You Start:
Always nail down the specifics of a deal in advance — even with friends and family. Before you consider an investment, you have to know what you are getting into and think if the terms are acceptable and fair. Before you start a job or enter into an investment, you have the most leverage because you have something to offer that the other party wants.
5. Watch Small Expenses:
Watching your expenses is a great way to gain capital. Do you really need to pay each month for Netflix, Amazon Prime Video, Hulu and all the other streaming services? Cut back on a few and you’ll have more income to save. It’s often the small expenses that add up because we don’t usually notice them.
6. Limit What You Borrow:
This tip is huge. A lot of people don’t realize just how damaging it is to borrow money if you aren’t using it for anything profitable. All credit comes at an interest rate: that means, the longer you wait to pay off your debt, the more it's going to balloon on you. For example, if you borrowed $1,000 and waited 10 years to pay it back at a 15 percent interest rate, you're going to owe $4,000.
Don’t get yourself into unnecessary debt. Just because you have access to credit doesn’t mean you should go out and take advantage of everything that’s offered to you.
If it’s too late and you’re already in debt, Buffett’s advice is to negotiate with your creditors to pay what you can. Then when you’re debt-free, work on saving some money that you can use to invest and build more capital.
7. Be Persistent:
Having tenacity and ingenuity allows anyone to win against a more established competitor. Embodying an unwavering courage makes a winner out of an underdog.
8. Know When To Quit:
This one has to do with counting your losses and learning from failure. Knowing when to walk away from a loss, and not letting anxiety fool you into trying again (with the same outcome) is a foolish way to establish savings and gain capital.
9. Assess The Risk:
Think through the pros and cons of any investment decision you make. Try to actually evaluate what’s good and if they’re realistic. For the negatives, try to weigh them against each other.
It also helps to approach decisions in the reverse. Sometimes it helps when making a decision to do a process of eliminations. Think about what you’re trying to avoid instead of what you’re trying to gain.
10. Know What Success Really Means:
Never measure your success by dollars. Buffett famously said:
I know people who have a lot of money and they get testimonial dinners and hospital wings named after them. But the truth is that nobody in the world loves them. When you get to my age, you'll measure your success in life by how many of the people you want to have love you, actually do love you. That's the ultimate test of how you've lived your life.
Photo via Wolf Of Wall St