Motivate Yourself To Build Wealth!

Getting control of your finances, increasing your net worth, and building wealth is not an easy thing to do. It’s actually extremely difficult. It will never happen without a plan, telling your money where to go, and the dedication to follow through with your plan.

Because of this, it’s important to figure out why you want to build wealth. Think about it right now! Why do you want to build wealth? Do you have specific goals you want to accomplish? Do you want to retire early? Do you want to change your family tree? Do you want the freedom to do whatever you please? Maybe you just want some “f#ck you” money? Whatever your reason is, it is important to have that reason fresh in your mind because you’re going to need to refer back to it frequently for motivation.

debt-slave

Personally, I don’t want to be a slave to anyone. I use the word slave because I firmly believe that if anyone has control over me and can manipulate me due to my finances, that’s exactly what I am…a slave to that person, job, loan company, etc.  Currently, the only outstanding loan I have is the mortgage on my house and it’s driving me crazy.  My mortgage, although extremely affordable as a percentage of my take home pay, is stressful because if keeps me from being able to leave my job if I wanted to quit today (to see how much house you can afford, look here).  My emergency fund keeps me safe for 6 months if I lose my job but my mortgage is keeping me from being able to choose any job I want, regardless of what that job pays.

So, for me, not wanting to be a slave is my “why”, and the motivation from my why will keep me disciplined and help me achieve anything I want! Do I want to have f#ck you money? Yes. Do I want to retire early? At this time I do. Do I want to change my family tree? It will be done. Any goals I want to accomplish can become a reality, all because I have the motivation to never be a slave to anyone.


Now it’s your turn to think about why you want to build wealth.  If my reason works for you, great! Roll with it and use it to live your dream of being free and financially independent.  If my reason doesn’t resonate with you, sit down and figure out:

  1. What are your goals that you want to accomplish in life? Write this down on a piece of paper and write down whatever comes to mind.  What would you do with the rest of your life if money wasn’t an issue?
  2. How would you live if you only had 6 months to live? What kind of life would you live?  How does it compare to how you’re living now?  How would it change if you didn’t have to worry about money?
  3. What are your most important goals? While you’re reviewing the goals you’ve written down, pick out which ones are most important to you.  Will you be able to accomplish your goals without getting control of your finances?  How will your goals be affected by building wealth?  How will they be affected if you don’t change how you spend/save money?

After completing this exercise you should have an idea of what’s important to you right now and how building wealth will only aid you while trying to accomplish your dreams.  Your goals will probably change over time so you’ll want to revisit this exercise periodically so that you can adjust.

So…What’s your why?

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Is The Millionaire Next Door Dead?

If you watch the news these days, you may notice that a whole lot of people seem to believe that the American dream is dead. No one can get ahead and the notion of “the millionaire next door” is no longer attainable. Well, fortunately for everyone, you can still become a millionaire. The American dream is still alive and you can achieve anything you set out to achieve.  But you have to WORK hard!  No one said it was easy to be successful.  No one said you can become financially free without sacrifice.  And you sure as hell can’t rely on the government to help you out.  It’s all on you to achieve what it is you want and I wouldn’t have it any other way.

So How Do Rich People Handle Money?

millionaire lifestyle
The majority of millionaires do not live like this.

There has been study after study done on how millionaires handle money and one of the most extensive studies I’ve seen, was done by Dr. Thomas Stanley.

As Dr. Thomas Stanley, author of “The Millionaire Next Door” points out, one of the most popular chapters in his book (among millionaires) is Chapter 2, Frugal, Frugal, Frugal. This chapter details the frugal lifestyle of millionaires in terms of the modest prices paid for clothing, shoes, watches, motor vehicles, etc.  Check out the book, it’s one of my personal favorites.

Chapter 2, is essentially the most important takeaway of the entire book and it says that millionaires budget, avoid debt at all costs, and invest a lot of money.  But, they are frugal because they are content with what they have.


So How Can You Do It?

Obviously, becoming a millionaire or being financially free is not an easy feat. It takes a lot of work! It takes a lot of discipline! But it is still a possibility…look at all of my fellow personal finance bloggers, they know it can be done and they’re documenting exactly how they’re doing it! So, why not find a person you may look up to, who is successful with money and find out how they handle their money? If you handle money the same way they do, I can probably come to a conclusion that you will also be successful with money.

You can also find a financial plan that works for you and stick to it.  It doesn’t have to be difficult.  I actually prefer that it’s simple to understand because that means that it’ll be simple to follow.  My recommendations are:

  1. Create a Budget
  2. Pay off all Debt (except for your mortgage)
  3. Build up an emergency fund worth 6 months of expenses
  4. Invest in Retirement
  5. Pay Off Your House
  6. Build wealth and achieve Financial FREEDOM!!!

Why Aren’t More People Free?

Are you happy with what you have?  The answer to this question is important in knowing if you will become rich or not.  Most millionaires are content with their $20-$30 pair of jeans, used car, and modest homes.  They dont feel the need to try to impress anyone and they don’t care about what a stranger at a stoplight thinks about their car.

So, maybe the reason that people feel like getting ahead financially is a pipe dream is because they spend their days finding ways to buy convenience and focus on how they can keep up with the Jones’ instead of focusing on building wealth and increasing their net worth.  The size of your income doesn’t matter if you’re making more money AND spending more money.

90% of millionaires are first generation rich, meaning that they are self-made millionaires.  They didn’t receive inheritances.  They worked their butts off, had a plan, were disciplined with their money, avoided debt, and invested month after month, year after year.

They did it, and you can too!


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How much house can you truly afford?

If you’re like me and you’re on a mission to retire early, you need to know that the choices you make always affect your timeframe for when you’ll reach early retirement.  It can shorten how long it is until you reach your goal or it can push it back further and further into the future.  How much of a house you buy will be one of the most crucial financial decisions you’ll make.

extravagant home
Why have a home like this if you have to worry about paying the mortgage for the next 30 years?

Like everything in the world, there are many different opinions when it comes to how much you should spend on housing.  There are many people who think that their house is an investment and it’s ok if they have a ridiculous mortgage payment on an extravagant home.  On the opposite end of the spectrum, there’s a large movement of individuals who lean towards keeping there expenses down to nothing which has in turn created a housing market for “tiny” houses.  Personally, I pretty much stand right in the middle.  I like to keep my expenses low but with a wife, 2 kids, and 2 dogs I can’t really force them to spend the rest of their lives in 300 square foot house.

I’ve never really liked to think of my house as an investment but I can acknowledge the fact that houses do appreciate over time.  At 3% appreciation over 30 years, a $235,000 house becomes worth $485,000.  Not too shabby, but it isn’t guaranteed and shouldn’t be relied on.


How Much Should I Spend On A House?

When figuring out how much you want to spend on a house, you want to avoid any advice from the banks.  Banks will allow you buy a house where the mortgage will be around 50% of your take home pay (and they wonder why there was a housing crisis).  If you’re spending 50% of your monthly take home pay on a house, you’re house poor ladies and gentlemen.  Personally, I’d like to see everyone keep their house payment around 25% of their take home pay when financed with a fixed rate 15 year mortgage.  At 25%, you have the ability to buy a decent house, pay off that house earlyinvest a lot of money, and have a little bit of a life.

House-PoorWouldn’t it be great if you owned a home that you could afford AND pay off early?  Doing it this way will allow you to not only invest more money in retirement but you’ll also have a possible appreciating asset ready to sell if you desire.  If it doesn’t appreciate?  You won’t have to worry about it because you don’t owe a dime on it.  I’ve never seen a bank foreclose on a house that doesn’t have a mortgage!

Most of house poor America is barely able to pay their mortgage because they received terrible advice from somewhere and significantly overpaid.  They invest less than 5% of their income, drive cars with car payments, eat out constantly, and spend every dime they receive.  Please don’t be like everyone else!  Don’t mess up the biggest financial decision you’ll make by over paying for a house.  It’s easy to get house fever while you’re walking around with a real estate agent.  Be patient, be disciplined, and remember to sleep on any decision you’re thinking about.  Your financial freedom is depending on it!

Remember, 25% of your take home pay on a fixed rate, 15 year mortgage!

**If you like talking about Money, Paying Off Debt, Building Your Net Worth and Retiring Early…This is the place for you!  Subscribe to receive emails of new blog posts, news, tips, and exclusive content!!!

Now That You Know Your Net Worth…

You’ve taken the time to write down, in detail, everything related to your finances and you’ve calculated your net worth.  Now you have this number staring you in the face and you’re probably having different reactions depending on your situation.  If you happened to have a positive net worth you’re probably thinking, “Well, at least I’m better off than the guy at Net Worth Explosion!”  But, if you’re like me and you saw a large sub-zero number punching you in the gut, you probably said something like, “Shit….I suck!”

I’m going to be honest, if you’re like the overwhelming majority of people in the world, it doesn’t matter if you have a positive or negative net worth.  You suck either way.  Remember the numbers I presented on my about page that referenced the net worth’s of individuals over the age of 65 in the United States?  It’s not pretty, but don’t worry, every starting number requires the same process for growing your net worth and becoming financially independent.

Pie chart on a stock chart with a budget
Budgeting is the first/most important  step to building wealth!
  1. Make a budget.
  2. Pay off Debt.
  3. Build an emergency fund big enough to fund 6 months worth of expenses.
  4. Invest in Retirement.
  5. Pay off your house.
  6. Build Wealth.

The process needs to be conceptually simple so that anyone can follow it with confidence.  Unfortunately, the majority of people have a hard time digging out of the financial basement and moving on to greener pastures due to the fact that they have to modify their behaviors and the way they think about money.  This is incredibly difficult.  Most people don’t even pay attention to their money.  They lead a life where they buy whatever they want, whenever they want it.  This is INSANITY!  A lifestyle like this leads to debt and a lot of it.  Debt keeps you in the rat race.  It prevents you from being able to save money!  It keeps you working a job you hate, making a commute you hate, and answering to bosses you hate.  In What Is Your Net Worth I explained how I accumulated $34,000 worth of credit card debt and following these 6 simple steps can help you avoid my mistakes.

Your goal, now that you know your net worth, is to work through these 6 steps and get out of the rat race so that you can do anything you want.  Want to take long vacations every month?  Done.  Want to work shorter hours so you can attend your children’s school events?  You can do it.  Want to stop working at all?  It can be done!  You can spend your day any way you want because you’ll have Financial Freedom.  All you need is a plan and I will be your guide as we work our way towards Early Retirement together!  It will not be easy, but this blog is here to offer support and motivation.

*What are your thoughts on Early Retirement?  What would you do if you could spend your day doing anything you want?  Leave a comment and don’t forget to subscribe to receive email notifications of new posts!