The author of “How Rich People Think”, Steve Siebold, spent nearly three decades interviewing millionaires around the world to find out what separates them from everyone else – poor people specifically. His findings? Their wealth had less to do about money itself and was more about their mentality.
Turns out that their misconceptions and erroneous beliefs about money was what was keeping most poor people poor. The chief misconception is about who is master – you or money. This is the basic mindset that is holding so many people back from creating wealth. When you understand that money is the servant and you are the master and it will only be as faithful as you train it to be, only then will you have moved past the first barrier. Money serves us two main purposes: the first is to allow us live comfortably and the second is to enable us help others. This article touches on common misconceptions about money that keeps most poor people poor.
- Spend now, save later: One thing that is certain in life is that current conditions will never remain the way they are. There will always be ups and downs and things will always change – sometimes for the worse, other times for the better. Most poor people, instead of having an emergency fund when conditions are relatively good, choose to enjoy the good times and are caught napping when low periods hit. Knowing that the times are largely unpredictable and we could experience misfortune at some point – be it a slump in business, an unforeseen emergency or a period of economic hardship, the wealthy are always on the lookout for a rainy day and prepare accordingly. Build an emergency fund in times of surplus so that you will have a cushion during a downturn. Another way to prepare for the unforeseen is to diversify income streams, so that if one business is having low returns, others will keep us afloat till it gets back on its feet. These are questions we should ask ourselves constantly – how do I diversify my income streams? How do i keep myself constantly developing so that when opportunities come, I can be prepared to take advantage of them?
- Living beyond your means: Founder of Side Hustle Nation, Nick Loper said the root cause of being broke is nearly always the same: People “spend more than they make. As far as I know, that’s the only cause of bankruptcy,”. This can be tackled in two ways: to keep your spending within the confines of your income and to work hard and smart to earn more so that you have a financial “breathing room” of sorts. Poor people usually have the same excuses for their spending: “I’m too poor to save” or “I will invest when I start making more money” or the popular “I’m too young to start investing”. The truth is: if you’re old enough to feel the pinch of poverty, then you’re old enough to start protecting yourself to avoid it in the future. Short-term thinking is what keeps people living from paycheck to paycheck, even when they start making way more money. The bulk of their spending, sadly is on acquiring things that will depreciate in value and not assets. This is another major difference between the way rich people and poor people think. People who remain poor or go back to being broke even after getting a windfall are people who spend on “stuff” that will add no value in the long term.
- Rather be entertained than educated: Even though the rich don’t place all their hopes on formal education the way the poor do, they understand the power of learning outside of school and even after leaving school. The saying “Poor people have a big TV, while rich people have a big library” applies here. Rich people understand that learning new things is valuable and that these valuable lessons and skills can be learnt from everywhere, as opposed to the poor way of thinking that the only valuable education is formal education. Rich people continuously seek to add to what they know, while poor people are content with the little knowledge they have already acquired.
- Don’t believe they deserve to be rich: Most poor people remain poor because they don’t believe that the value they can create is worth paying for. How many of us know how to ask for money or negotiate salaries? How many of us know our true worth in the value we can provide? You can only grow as far as your self-image will allow. If you ever want to make six-figures, then you have to first believe you can. Once you believe you bring a unique value that you alone can provide, you become aware that you deserve to be properly paid for it. Only when you are able to see yourself worthy and deserving of a six-figure salary, will your future employer see it too.