Like a small steering wheel that directs a huge tractor-trailer as it crisscrosses the country, our tiny brain guides the decisions that we make as we move through life. Most of the time, our brain helps us to make pretty good decisions, including what to eat, who to spend our lives with, and what dangers to avoid. But like a small misalignment in steering can slowly make a vehicle veer off the road, the wrong kind of thinking can distract you from reaching your financial potential and from living the life that you deserve. What kind of thinking should you avoid?
1) Avoid “living in the moment” and not worrying about the future.
In a consumer-driven society, economic growth is usually achieved when manufacturers convince people to buy something now, even if they don’t really need the new product. Advertising executives are geniuses when it comes to taking the idea of a certain lifestyle or status and packaging it up into something that you can take home. But the problem comes when people spend money on these products thinking only about their present wants.
For example, think of a consumer who spends $35,000 on a new BMW just because it makes them feel good to have that beautiful hunk of metal in their garage. They like what it represents and what it says about them as a person. A while buying a luxury car isn’t necessarily a bad thing, too many people buy theirs without thinking about all that the extra money spent on luxury could have accomplished if invested in something else. By spending, let’s say, an extra $10,000 to get the status of a BMW, the consumer misses out on what that $10,000 could have meant for their financial future in terms of returns on investment and cash flow. That $10,000 could have been invested into an asset that would have outlasted the car by decades.
Living in the moment is a small misalignment that often distracts people from getting to their destination.
2) Avoid following “the conventional wisdom”.
Do you want to have a “conventional” life? Right now, a conventional life in the United States means worrying about being foreclosed on and not having enough to retire on. Is that what you want? If so, then by all means keep following the same old advice that is being doled out by the so-called financial experts on the payroll of corporate America.
However, if you are looking for something better, then learn to imitate the methods of the wealthy. For example, instead of buying a luxury car with your active income (income from your job) use your active income to invest in a cash producing asset and then use the cash from that asset to buy your new BMW. That way, you can have your car and a secure financial future as well.
A small steering wheel determines where a multi-ton vehicle ends up; your thinking and the actions that it inspires will determine where you end up financially.