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Note:This is the fourth of 14 consecutive posts from 2nd to 15th of April about the principles of how to get rich. Check back daily or subscribe to the RSS feed
The ability to set goals is in a way the most important part in becoming rich. Goals are what start this all. A goal is something that you want so badly that it hurts when you don’t get it. A goal is what makes you develop and step out of your comfort zone. Setting a goal gives us the opportunity to assess later on if we are successful or not
Written Goals pay off
In 1953, researchers surveyed Yale’s graduating seniors to determine how many of them had specific, written goals for their future. They were asked to answer the question
“Have you set clear, written goals for your future and made plans to accomplish them?”
Only 3% had written down their goals, 14% of graduates had goals but they had not written them down and 83% had no specific personal or business goals.
10 years later they made another study among the same people. It came out that:
The 14% who had goals but didn’t write them down were earning on average twice as much as the 83% who had no goals at all.
The 3% percent who had written down their goals were making 10 times more than the other 97% put together.
The interesting thing with goals is that when setting goals you don’t need to know how you will achieve them. I think that Charlie “Tremendous” Jones said it best in his book Life is Tremendous that
When you have the why the how comes itself
Be sure to think through your goals - is this what you truly want? If it is - go and do it! It is important that you should set your goals by yourself. If somebody else sets them for you it might feel that it is not what you wanted after all and the goal will never be accomplished. This is also a major problem in many companies where goals come from management and ordinary employees never feel as if the goals are theirs. Always set your own goals!
The difference between a goal and a dream
The difference between a goal and a dream is that goals have a time limit.
A dream is that “I will someday be a millionaire”
A goal is that “On April 5th in 2017 I will be a millionaire“. This imposes a deadline and therefore makes it easier to keep track on how you are doing with achieving your goal.
An even better goal would be
“On April 5th 2017 at 10 o’clock in the evening I am sitting on my million dollar yacht on the Mediterranean sea, looking at the sunset and having a cigar”.
As you can see I tried to visualize what it would be like to be a millionaire. It has been shown that visualizing your goals has a great impact on achieving them. For instance Olympic gymnasts always visualize their performance before really doing it.
Have S.M.A.R.T goals
Consultants always stress that goals should be SMART. By smart they mean
S - Specific. A good goal has to be specific. You have to know exactly what it is that you want. If you have a vague goal you will have vague results.
M - Measurable. A good goal is measurable. If your goal is to become a millionaire by 2017 then you can always measure your success by how much money you already have.
A - Attainable. A good goal is attainable. It is important to set big goals but it is also important that they are attainable. An attainable goal is one that is both realistic but also attainable in a shorter period of time than what you have to work with. Now when I say attainable, I don’t mean easy. Our goals should be set so they are just out of our reach; so they will challenge us to grow as we reach forward to achieve them.
R - Realistic. A good goal is realistic or real. A goal has to be something that we can reasonably make “real” or a “reality” in our lives. There are some goals that simply are not realistic. You have to be able to say, even if it is a tremendously stretching goal, that yes, indeed, it is entirely realistic—that you could make it.
T - Timeframe . A good goal has a deadline. Every goal that you have should always have a date associated with it. For big goals it is also OK to break them into smaller parts with each having their own deadlines. For example if my goal is to be a millionaire by 2017 my sub-goal could be to have 500 000 dollars by year 2013.
How to accomplish goals
Be sure to set SMART goals, but there are some things that make it even more realistic for you to achieve your goals.
1. Tell your friends about your goals and keep them updated. Letting your friends know of your goals can be a very powerful ally. This can help you whether your friends believe in you or not. People who don’t think that you can achieve your goals are called skeptics. A skeptic can help you because during hard times the only reason to move on with your goal could be to prove your skeptics wrong.
People who believe in you and your goals are helpful because often the can give feedback on what you can do even better and of course they are the one’s who will be there for you on difficult times.
2. Be consistent - the best way to accomplish a goal is to never loose sight of it. When you are saving money in order to reach the magical 1 million dollar mark but after getting to $500 000 decide to take a small break and spend some of your saved riches it will can set you back many years.
3. Control the controllable’s. This is the secret of rationality that you need in order to accomplish your goals. For instance in 2005 and 2007 I was a door-to-door books salesman. It was the most difficult thing that I have ever done. When talking to people I could never control how they will react to me - friendly or unfriendly. What I could do was to meet a lot of people - that way I saw more friendly people who were willing to buy the books that I offered. Seeing more people also meant that I got better at communicating and therefore I could better influence the people who were a bit less friendly. Since I knew that I should only control the controllable’s I only concentrated on the hours that I work, the number of people that I see and my attitude.
You can not control if it is going to rain but you can control how you react to it.
Note:This is the first post of 14 consecutive posts from 2nd to 15th of April about how to get rich. Check back daily or subscribe to the RSS feed
There probably isn’t a person in the world that does not want to be financially free. The idea that one day you have enough money to do whatever you want thrills everyone from children to grown ups.
But as we all know - some of us make it rich and some of as don’t.
The laws of success are universal and by following them carefully it is possible for anyone to get rich.
Today I am going to talk about the most important rule on getting rich:
Pay yourself first
This is the single most important and also most overlooked principle on how to get rich. The concept of “pay yourself first” is so easy that even a 3 year old can understand it but few of us are actually using it.Most people think that getting rich can’t be as simple as paying themselves first and tend to skip this step.
BIG MISTAKE! Not following this principle automatically reduces your chances of getting(and staying) rich by 90%. In fact I would go as far as to say that if you are not willing to start following this principle there is no point in reading this post any further - you will not get rich. Go back to work!
What does it mean “pay yourself first”?
Each and every time you get paid, immediately take a portion of your money and set it aside - you can not spend this money. This is the money that is going to make you rich. You can simply save this money on your bank account or better yet - invest it wisely.
This money is going to generate interest and grow your investments. The compounding interest from your money will eventually be more than the money that you have set aside. Albert Einstein didn’t say “The most powerful force in the universe is compound interest” without a reason.
Remember: It is important that immediately after getting paid you should put aside an amount of money that you have predetermined. It is of the utmost importance that you do this before paying any bills, shopping or spending some of the money on something else. Whenever people decide to start saving money they will usually pay for all their bills first and then live as frugal as they can only to discover that they have spent all their money and there is nothing to set aside. It doesn’t work this way!
The natural law of money says that our spending habits will expand until we spend everything available. For example if you have 1000 dollars until the end of the month you will spend it all by exactly the end of the month. If you put aside 500 dollars from your paycheck immediately after receiving it you will have only 500 dollars left until the end of the month but this will almost always be enough. In fact depending on the amount of money you set aside you might not feel any difference. The only difference will be that in the end of the month you have some money set aside that otherwise wouldn’t be there.
By paying yourself first immediately after getting your paycheck you will make sure that you will stick to your plan of collecting money - Always sticking to the plan is the best way of realizing your goals and getting rich.
The government pays himself first
The government also uses the pay yourself first principle in order to secure the money that they have already budgeted for.
Have you ever thought why does the government take taxes from your paycheck before you get paid?
They are simply making sure that they will get their share of the money. If you would have to pay your taxes in full at the end of the month with the money you have left from your paycheck there would be awfully lot of people who would not be able to pay. If the government uses the pay yourself first principle why shouldn’t you?
How to pay yourself first
The easiest way to start paying yourself first is to open a separate account where you can deposit your predetermined amount of money from your paychecks. It is also a good idea to make sure that it is not easy to spend this money.
If you are using online banking it might be possible to set it up so that the transfer to another account is made automatically after receiving the paycheck. If you can do this it is highly recommended. For example my online bank is set up to transfer a predetermined amount of money every month to an account with a brokerage firm. It saves me the hassle of doing it myself and ensures that I follow the pay yourself first principle of getting rich.
Always remember that part of your money belongs to yourself
If you spend all your money by the end of the month it means that all of it belongs to someone else. What’s the point of working for money when it does not belong to you?
The reason that you are already not rich is probably because you do not follow this principle. You might know it, but that’s not enough. In order for it to work you have to use it!
Check back tomorrow for the second most important principle of getting rich.
Seems that a lot of people agree that professional investors are better in investing than you and me or the so called amateur investors.
While this might often be the case there is literally tons of information out there about exactly the opposite being true. If you would like to know how an ordinary person can beat the professionals in their own game I would recommend to start from reading the classic One Up On Wall Street by Peter Lynch.
But that’s not what this post was supposed to be about.
While there is no doubt that an amateur can beat a professional there is also no doubt that there are people (usually professionals) who have an amazing track record. Peter Lynch and Warren Buffett are the first to come in mind. These are the people who have shown year after year that they can beat the market. For example Warren Buffet’s portfolio has grown an average of more than 20% per year.
With a rate like that it takes a little less than 4 years to double your money. The average return of the markets is widely believed to be about 12% . With a return of 12% you would double your money in a little less than 7 years.
The key point to agree upon here is
There are people who constantly outperform the markets.
The Average Joe
Let me ask you this. Have you ever lost money in the markets? Chances are that when you have done at least a few investments in your life you have lost money.
Now let me ask you another thing – Have you ever made back what you lost – in the markets?
I bet that the answer is NO. It is no for the majority of people.
For the average investor, investing is a sideline. When he takes a loss, he usually subsidizes his portfolio from his salary, pension fund, or other assets. If the average Joe has 1000 dollars less than his goal he will simply put a little more money aside each month to get back to the desired level.
The Master Investor
For the Master Investor investing is not a sideline – it is his life. So when you take a hit and lose a portion of your portfolio – you can’t subsidize it from your salary (because you only get paid when you make money). The only way to get the money back is to make it back in the markets.
Consider this - if you lose 50% of your investment capital and you manage to achieve the average 12 percent a year return – it will take you a little less than 7 years to get back to where you were before the loss.
With Buffett’s average return of 24.4 percent it would take 3 years and 2 months and for George Soros with an average yearly return of 28.3% it would take 2 years and 9 months.
What a waste of time!
Isn’t it simpler to just avoid the loss in the first place?
So there you have it:
The biggest difference in the thinking patterns of highly successful investors and the not so successful ones is that for professional investors losing is not an option. If you lose then it will take a lot of time to get the lost money back. So you only invest when you are absolutely certain that you won’t lose it.
If you can’t subsidize your losses then your thinking shifts from “Make profit” to “Keep what you have and after that if possible make a profit”
So here you go – Only invest when you are certain that YOU WILL NOT LOSE YOUR MONEY.
Below is a short video about the things that make us successful in life. The presenter is Richard St. John who made his observations based on over 500 interviews with successful people.
Here is a short review about the video.
Here are the 8 common things that help us be successful.
1. Passion
Do it for love not for the money. The money will always follow when you truly enjoy what you are doing.
2. Work
It’s all hard work. Nothing comes easily. But remember to have fun.
3. Good
Put yourself into something and get damn good at it.
Practice makes perfect.
4. Focus
It all has to do with focusing yourself on one thing
5. Push
Push yourself. Physically, mentally. You have to push, push, push and push
6. Serve
Serve others something of value - that’s how people really get rich.
7. Ideas
Have ideas and make them come true.
Listen, Observe, Be Curious, Ask Questions, Solve Problems, Make Connections - Ideas will follow.
8. Persist
Persistence is the number one reason that successful people are successful.
Once upon a time there was an entrepreneur who understood how important it is to educate himself in order to stay competitive.
He set himself a goal that he will take 10% of what he makes and spend it on seminars and educating himself.
After 10 years the guy was struggling – thanks to all these seminars he had made so much money that in order to keep spending 10% of what he made on educating himself he was attending seminars 3 months a year.
This is actually a true story that I read some years ago but I can’t remember who this guy was. If you know then let me know!
Each and every one of us has seen the natural law of money at work.
It is so simple that most of us are familiar with the law in a subconscious level but almost never think about it consciously.
So what is this law you ask?
It is simple. The natural law of money is as follows:
The more money you have the faster you will get to the point that you don’t have any money at all. The less money you have the slower you will get to the point that you don’t have any money.
In other words - the more money you have the faster you will spend it.
This is a universal law but it only works in the middle of the scale - it will cease to work when you don’t have any money at all or if you are a wealthy multi billionaire.
So, the natural law of money says that the more money you have the faster you will get rid of it?
How can this be you ask? It is common knowledge that in order to make money you need to have money in the first place - aren’t these 2 statements contradicting?
Well, not really - the natural law of money only works if you are not thinking about how to make more money. If you start to think about how to keep your money - or better yet - how to grow your money then the natural law of money stops working.
If you start thinking about how not to spend your money your chances of multiplying what you have grow exponentially.
Every morning I wake up and watch a motivating video to positively transform my thought processes - I have found that it helps me to stay more positive and get what I want out of life. The video that I usually watch says that I am special in a good way and that I can achieve whatever I want to.While some say that what I do is a little like brainwashing - I totally disagree - this is brainwashing!
But instead of letting somebody decide what is good for you - you need to decide for yourself and then make it happen. Watch the video that is right for you.
When I was searching youtube for the video that I usually watch in the mornings - I found another video that I plan to start watching.
If you want to start attracting money and wealth in to your life then watch this video daily - it will make you think about the things that will eventually make you rich.
Are you among those people who have gathered a bunch of books that are all worth reading but you simply haven’t found the time to deal with them?
If yes, then think about a quote from Charlie “Tremendous” Jones
“You will be the same person in five years as you are today except for the people you meet and the books you read”
So think about today - how many new people have you got to know?
Well… me neither.
Since most of us don’t meet a lot of new people day-to-day it leaves us with the second option - reading.
There is a lot of books I have read during my life time but there is even more books that I haven’t. Chances are that it’s the same with you.
I took a look at the books I had beside my bed and came to the conclusion that I have completely read just a few of them versus most I have only read bits and peaces or even nothing.
I am changing this.
From now on I am going to spend 30 minutes to 1 hour reading every day.
Think about this for a second:
Average person reads about 30 pages per hour. Reading for 1 hour every day for a single year means that you would read 10 950 pages. The average book being about 200 pages makes it almost 55 books a year.
What do you think - if you were to read 55 books in any given field would it give you a small edge before all the people who are not doing any reading(90% of the population)?
Well, that’s why as of today I am reading at least 30 minutes every single day.
And here is what I did to motivate myself:
By the way - Charlie Jones’s book “Life is tremendous” is one of few books that I have read in English for several times.
This site is all about my knowledge, discoveries and experiences related to personal finance, investing, tips on success and life, and how to make money online.
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