4 Disempowering Beliefs About Money That Keep You Poor

4 Stupid Beliefs About Money That Keep You Poor

Rich people are…

What is the first word that came to your mind? Dishonest? Greedy? Lucky? Awesome?

Our relationship with money will greatly determine the amount of money we will earn throughout our life. While there is nothing wrong with being poor, I doubt that many of you have actually a strong desire to remain poor for the rest of their life.

In this article I’m going to introduce you to 4 disempowering beliefs about money that keep you poor. Hopefully, it will serve as an electroshock for some of you.

1. Money is not important

Money is like sex. You’ll think of nothing else if you don’t have it – yet you’re free to think of other things if you do have it. – Dan Lok, F.U Money – Serial entrepreneur & millionaire mentor

Sure. Money is not important. Can you remind me exactly why you spend 40+ years of your life working 40 or 50 hours a week in a job that you are probably not passionate about or that you may even hate? I think the word you are looking for starts with «mo » and ends with « ney » 🙂

If I were to give you $5 million right now would you do the exact same thing you are doing now? Would you have the same career? If not, then yes money is important to you whether you want to admit it or not.

Pretending that money is not important in your life is doing yourself a great disservice. Sure, it would be nice if we could live in a world where money was simply unnecessary, but in our current society money is the best thing we have found so far to exchange products and services efficiently and create wealth.

2. Money is bad

Money will only make you more of what you already are. If you’re mean, money will afford you the opportunity to be meaner. If you’re kind, money will afford you the opportunity to be kinder.  – T. Ecker

Money is bad only if you are an asshole! Money is just a means to an end and is never good nor bad. If you are a poor asshole and suddenly become rich, you will simply become a rich asshole. Only the scale will change. Instead of stealing $50 from the cash register you will embezzle million of dollars.

On the contrary, it you are a great person, money will give you incredible leverage to create good in this world. Here are some amazing things that money can provide:

  • Free up your time so that you can focus on what truly matters to you
  • Educate yourself so that you can better serve other people and impact their lives
  • Donate money to charities or any other endeavor you want to support
  • Ensure that you have enough savings in case you or someone close to you get sick and you need to pay the bill

Despising money and remaining poor doesn’t do much for society. Sure, you can be poor and give money to charity, but you could also be rich and give (more) money to charity. It is easier to be poor than to be rich but is it what you really want?

Recently, I remember coming across a thought-provoking quote on facebook saying: “being poor is selfish”. I thought it was an interesting one. Indeed, isn’t it selfish not to keep improving yourself and learning new skills in order to provide more values to other people through your products or services?

3. Rich people are dishonest

“I hear sometimes of men that get millions of dollars dishonestly.” Yes, of course you do, and so do I. But they are so rare a thing in fact that the newspapers talk about them all the time as a matter of news until you get the idea that all the other rich men go rich dishonestly. – Russel H. Conwell, Acres of Diamonds

Not more than poor people and probably less in fact. In order to become successful in our life and our professional career, it requires us to work on our communication skills, to become more confident, to have more self-discipline, to get out of our comfort zone and to constantly stretch ourselves. Rich people generally spend way more time working on themselves than poor people do.

Also, remember that if you choose consciously or unconsciously to believe rich people are dishonest or bad in any way, you’ll never be rich yourself. Why would you become something you hate?

The business world is certainly not the most ethical place in the world, but believing that people on the top are all assholes and people on the bottom are by some magic extremely ethical doesn’t make any sense.

Yes, earning a lot of money honestly is perfectly possible. Is it easy? No, it is certainly harder than doing it in an unethical or almost ethical way. I think Pat Flynn from www.smartpassiveincome.com is a great example of someone making money in an ethical way.

4. Money is hard to make

Is money hard to make? I believe that it really depends on the personal belief you currently hold about money. The more you think that money is hard to make, the harder it will probably become.

In his book “Secrets of the Millionaire Mind”, T. Harv Eker shows that each of us has a money blueprint that largely determines the amount of money we can earn. We generally inherits this blueprint from our parents and we keep it for the rest of our life unless we make a conscious choice to reprogramm our subconscious mind. What is your money blueprint? A good start would be to look at your bank account and at your parents’ relationship with money.

In fact, nowadays, with the incredible potential for leverage that internet provides creating wealth is way easier than in the past. Publishing a book, creating a company or outsourcing tasks to people all around the world has never been easier. If you are a little bit creative you will realize that money might not be as hard to make as you previously thought.
Here is a great exercise from Dan Lok’s book for you:
Brainstorm at least twenty ways you can generate more income without working harder.

What about you? Do you have any disempowering belief about money? If I tell you money is…  what would you say?

See also:

Resources (affiliate links):

Below are some great books that I’ve personally read and benefited from:

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The 5 Commandments of Personal Development

How to Escape the Rat Race and Live the Life you Want

How to escape the rat race

Are you sick of working? Do you wish you could escape the rat race, quit your 9/5 job, and spend the rest of your life doing what you really love? I might have something for you.

It is very easy to get stuck in what appears for most of us to be the only path that exists: working 40 years and retiring at 65 hoping that we will be lucky enough to enjoy at least a few years of retirement before becoming sick or passing away. But, is it really the only option we have?

Unfortunately, in this article, I’m not going to give you any magical pill or get-rich-quick schemes to escape the rat race, because there aren’t any, but I will provide you with different perspectives that will invite you to reconsider your current lifestyle and, I hope, open doors to new opportunities in your life. In the end, it is you who must decide what lifestyle suits you the most and what you are ready to do to escape the rat race. You CAN escape the rat race, but will you?

In this article I will talk about 4 different lifestyles (+ 1 bonus lifestyle). To make it easy to understand I caricatured each style so bear with me for the sake of the demonstration.

Here are the 4 lifestyles:

  1. Traditional 9/5 job lifestyle
  2. Passion-oriented lifestyle
  3. Vacation-oriented lifestyle
  4. Early retirement lifestyle

1. Traditional 9/5 Job lifestyle

It is the most common one by far. You have a traditional 9/5 job and you just hate it. You aren’t really growing, you are certainly not excited about your job, but you are making a decent amount of money, which allows you to live a comfortable life with a nice house, a nice car and everything else you need. In order to sustain you current lifestyle you’ll have to work until 65 at a job you don’t like, wishing everyday you could escape the rat race and do what you love. Is it you?

2. Passion-oriented lifestyle

You are spending time doing what you love every single day. You get up in the morning excited to start the day, and work doesn’t look like work to you. You may not be earning a lot of money, but you do what you love and are satisfied with what you have since you aren’t a heavy spender. Your house may be smaller and your car older and cheaper than your neighbor, but it doesn’t really bother you.

My guess is that most people aren’t that lucky because they haven’t really found out what they love to do. (See Step 4: Find Your Life Purpose). Steve Jobs in a famous speech said “You’ve got to find what you love” and I have to agree with him on that. If you haven’t find your passion yet, I invite you to keep looking even if it takes you decades to figure it out!

3. Vacation-oriented lifestyle

You alternate work and vacations. You generally take a few months of vacations every year or take one-year break from time to time. Because you are enjoying long breaks, obviously you aren’t making as much money as people working all year long, but you have few needs and a simple lifestyle so it is not a problem for you.

It might be difficult for you to have a career and climb the corporate ladder, but, hey, you had no plan in the first place to fully join the rat race so you have nothing to complain about!

Your free time offers you the opportunity to learn new skills that may help you generate some revenues in the coming years if chosen wisely. The biggest benefit from that lifestyle is that you don’t have to wait for retirement to enjoy your life. You clearly don’t know how long you will be around and whether you will be healthy enough to enjoy your life after retirement? Is it your lifestyle?

4. Early retirement lifestyle

You are determined to get out of the rat race as fast as possible. You don’t follow the usual “save 10% of your income and invest it for your retirement” mantra that investors love so much. Why? Because you have absolutely no plan to hang around for 40 years! You’re not playing in the same league. Your personal mantra is rather “I save 60 to 80% of my income and invest it until I have enough money to leave the system”. Then you can start focusing on what I really want to do. When you save such amount of money each month that totally changes the game, doesn’t it? In fact, in extreme cases, some people manage to retire in their 20s after working for only 5 years!

No. For you, no vacations on exotic beaches where you spend most of your savings accumulated during the year to make sure that you will never get out of the hamster wheel. No expensive cars, branded clothes or luxury houses. You must break free as soon as possible!

So what is your favorite lifestyle?

More about early retirement

Now, Let me explain more in detail about the early retirement lifestyle as it is particularly appealing, especially for those of you who aren’t particularly materialistic.

To put it very simply here is how it works:

  1. Save 60 to 80% of your income
  2. Invest your money in index funds (or other assets but make sure you know the risks involved!)
  3. Retire when you have enough passive income from investment to sustain a similar lifestyle until you die (Of course, the more frugal you are, the early you can retire)

Can you really save 60~80% of your income?

Obviously, the higher your salary is, the easier it will be for your to save money. However, don’t think that you need to be rich to adopt that lifestyle. This method is totally possible with an average salary and you will find people online that have done it. You don’t necessary need to save 60% or more, but the more you save the easier you will be able to retire.

Here is what this lifestyle involved:
– Live in a smaller house or apartment close to your working place
– Don’t own a car (or buy a cheap one and only if you really need to)
– Cook your own meal and avoid going out for dinner (it is likely to be healthier too)
– Buy very little clothes. Occasionally, you may buy expensive clothes like jackets if you know you will wear them for 10 years or more, or if they have a high reselling value
– Buy only second-hand stuff, and with a high reselling value when possible (nowadays most of the second-hand products are only a fraction of the original price. Say thank you to your consumerist friends!)
– Repair or make your own stuff if necessary
– Don’t buy anything unless you really need it
– Have inexpensive or free hobbies like walking, running, reading, having a coffee with your friends etc. (Whenever possible, choose hobbies that may turn into future revenues. If you like to study, use your free time to build valuable skills like writing skills, programming skills, blogging…)

As you may have noticed by now, here we aren’t talking about luxury retirement where you can go cruising all year long (You could very well spend much of your time in beautiful but inexpensive countries though). This lifestyle assumes that you’ll maintain the same frugal lifestyle that you had before so that you can live out of your passive income without using your capital assets.

However, financially speaking it is not as bad as it sounds since it assumes that you won’t generate any revenue at all after you « retire », but in fact:

  • You are very unlikely to completely retire. You will likely work part-time, create a new business or even work full-time if you feel like it. What is really awesome is that you will have enough money to live (simply) without having to work and will be able to focus on what truly matters to you. For self-actualization and creativity work that’s fantastic! Imagine what you could do if you had the time and the safety net to focus on what you really love.
  • You have a lot of time to learn new things that could turn into future revenues. For instance you could learn skills that allows you to work as a freelancer online (writing, design, programming…)
  • You may inherit from your family (though I wouldn’t count on that!)
  • You will likely collect some money from social security or pension plan in the future

As you can see, technically speaking, rather than a retirement, it is more like an escape plan allowing you to leave the system and giving you the safety net to focus on what you love.

BONUS lifestyle: Very early retirement lifestyle

This lifestyle is the early-retirement lifestyle on steroids! It adds online passive incomes to the early retirement lifestyle and requires you not only to save most of your income, but also to spend your free time building online passive income to escape the rat race even earlier. There are different ways to generate passive income online such as:

  • Affiliate marketing (selling someone else product on your website). It is what I’m doing just right below.
  • Creating your own products (Ebooks, Online courses, podcasts…). I’ve personally been using K Money Mastery (affiliate link) comto help me  publish ebooks on Amazon. I highly recommended it to you if you want to start generating passive income online.
  • Putting ads on your blog etc.

You don’t necessary need to have a blog to generate passive income online but it is generally better. Building passive income requires hard work and is definitely not easy! However, it is certainly very appealing. So if you happen to have something you are passionate about, or have a nerdy side, building a blog in your free time could be a great way to get started.

Note on investment

Most financial advisors will tell you to save at least 10% of your income and to invest it, and it is indeed a wise thing to do. Simply saving 10% of your income each month until you retire at 65 should provide you with enough money for retirement. Of course, if you want to retire early and have a safety margin, you should save and invest more! (Learn more here: Myth #3 Mutual Funds – Are You Investing Your Money Wisely? )

What lifestyle should you choose?

In this article I provide you with 5 different lifestyles that have each their benefits and their drawbacks. None of these lifestyles rely on get-rich-quick schemes and they all come with their own set of challenges. Some of them may seem impossible to you, but, it is mainly because you have hardly heard of them before. Or, maybe, because you aren’t ready to trade your little comfort and take a leap of faith to do what you really want to do. Give them some thoughts.

In the end it is up to you to decide how much free time you want, how much money you need and on what term you want to retire.
I hope that you’ll use this simple roadmap to reconsider what really matters to you in life and make sure you are taking the path that is right to you. Everyone’s situation is different, but,  hopefully, this article will open your eyes on what is possible for you, and will help you escape the rat race!

So which lifestyle do you choose? Leave me a comment below and share with me your ideal lifestyle.


Some resources to go further

On finding what you love

On passive income

  • Smartpassiveincome.com If you want to build passive income online it is a great site to start with. There are many podcasts and free resources and the guy who run the blog is totally honest and transparent.
  • K Money Mastery  A step-by-step method for making money with Kindle publishing that I’ve been using myself.

On early retirement

On investing


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The 5 Commandments of Personal Development

The 5 Commandments of Personal Development

Myth #3 Mutual Funds – Are You Investing Your Money Wisely?

Money: Master The Game

The goal of the nonprofessional should not be to pick winners – neither he nor his « helpers » can do that – but should rather be to own a cross section of businesses that in aggregate are bound to do well. A low-cost S&P 500 index fund will achieve this goal. – Warren Buffet, 2013 letter to shareholders

After Myth #1 – Human Beings Need To Eat Meat, and Myth #2 – I Have No Talent – Do You Need Talent To Be Successful? Here is the third myth of the series. I just finished reading Tony Robbin’s new book entitled: MONEY Master the Game: 7 Simple Steps to Financial Freedom and I thought it was good opportunity to write about something I learned in my MBA that struck me. One of the main advice he gives in the book is to stay away from classic mutual funds. Why is that? Most of us are too busy and don’t have time nor wish to become an investment expert. It sounds reasonable then to rely on professionals to manage our money. But should we? Learn the truth about mutual funds.

Index funds vs. Mutual funds

Let’s first briefly explain what mutual funds and index funds are.

What is a mutual fund? It’s a investment vehicle that collects funds from many investors. A money manager invests the fund’s capital by buying stocks, bonds and other assets trying to maximize returns for the investors (in theory). The underlying assumption is that it is possible to beat the market by actively trading assets in the right timing.

What is a Index fund? It’s a type of mutual fund that tracks a market index. The purpose is not to beat the market but just to replicate the performance of a market index like the S&P 500 for instance. It is way cheaper because it is simpler. There is no need to constantly buy and sell stocks and try to pick winners that will outperform the market. The underlying assumption is that we cannot beat the market so we should just track it.

Can we beat the market?

A blindfolded monkey throwing darts at a newspaper’s financial pages could select a portfolio that would do just as well as one carefully selected by experts – Burton Malkiel, A Random Walk Down Wall Street.

The reality is that very few people can beat the market over the long period of time (20, 30 years or more). People constantly try to find ways to be the market. However a large majority of mutual fund companies actually underperform the market so it is very unlikely for an individual investor to beat the market.

When Index funds outperform mutual funds

Here is a few things you should know:

  • 96% of actively managed mutual funds fail to beat the market over any extended period (and it does not include funds that were liquidated or merged with other funds due to poor track record.)
  • Total fees pay by investors to mutual funds reach usually 2 to 3% per year. Vanguard 500 index which tracks the S&P index has annual fees of only 0.17%!

To illustrate what it means to pay higher fees here is the example given by Tony Robbins in his book:

There childhood friends, Jason, Matthew and Taylor, at age 35 invest $100,000 and have equal performance of 7% annually with their respective mutual funds. At age 65 they compared how much money they have. They pay respectively 1%, 2%, and 3% annual fees.

Their account balance at age 65:

Jason: $324,340

Matthew: $432,194

Taylor: $574,349

So basically, you are paying 2 or 3% annual fees to mutual funds that fail to beat the market over a long period of time when you could just invest in index funds like Vanguard that mimick the market and whose fees are much more lower. Over a long period of time it can cost you $100,000, $200,000 or more in fees depending on how much you invest! (for more information see this page: The Retirement Savings Drain: Hidden and Excessive Costs Of 401(k)s)

 Don’t try to earn more try to lose less

Money: master the game

If it is highly improbable that you beat the market from the time you start working until you retire, how then can you increase your savings?

If you don’t try to beat the market and just track the market you are less likely to lose money since the market move upward over a long period of time.

There is four things you can do to increase your savings

  1. Make sure you use the law effectively in order to pay the lowest taxes possible
  2. Pay the lowest fees you can (Vanguard index funds seem to be one of the best choice)
  3. Decrease your spending to save more money
  4. Earn more money so that you can save more

Are you investing your money wisely? Investing is scary and people are afraid to lose their money. However, you should know that someone who invests consciously may be able to retire 10 years earlier than someone who don’t and have a comfortable income after he retire. Unfortunately, people who know most about money are generally people who already have money. People who would gain the most by knowing about investment are people in the low income bracket. I would highly encourage you to educate yourself by reading a few books about investment (see the list below). Tony Robbin’s new book is in my opinion the most practical book (especially if you live in the US) so I recommend you start with it. Just knowing a few principles can prevent you from losing a lot of money.

Few resources you might find useful

MONEY Master the Game: 7 Simple Steps to Financial Freedom
Tony Robbins application MONEY: Master The Game – 7 Simple Steps to Financial Freedom
Save More Tomorrow Plan: A plan to help you save more money at your own pace
StrongholdFinancial.com: Compare the performance between your portfolio and the recommended Stronghold portfolios (for US citizens)
Americabest401k.com: Check how your 401k is performing related to other plans
How the Economic Machine Works – Int Thirty Minutes : Video made by the billionaire Ray Dalio

Suggested readings

The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel, Benjamin Graham – A classic by Warren Buffet’s professor
MONEY Master the Game: 7 Simple Steps to Financial Freedom, Tony Robbins – Practical guide to achieve financial freedom by the famous coach Tony Robbins. This book is not only about investing but also gives you an opportunity to think about the way you want to design your life based on your values. Very practical if you live in the US.
Rich Dad Poor Dad: What The Rich Teach Their Kids About Money That the Poor and Middle Class Do Not!, Robert T. Kiyosaki
One Up On Wall Street: How To Use What You Already Know To Make Money In The Market, Peter Lynch
A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing, Burton G. Malkiel

See also:

Myth #1 – Human Beings Need To Eat Meat

Myth #2 – I Have No Talent – Do You Need Talent To Be Successful?

 

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