Jun 22, 2020
We’ve been hit by a health crisis that has led us into the most serious global recession in almost a century.
Despite living in one of the richest countries in the world, many Australians are currently struggling financially, and if history repeats itself, the gap between the wealthy and the average Australian will only get wider.
But there’s still good news. Though recent events have left many feeling uncertain, the same events will also be responsible for some of the best opportunities of our lifetimes. It may give you the opportunity to realize your own financial independence.
We’re moving into a time of change.
Most people don’t like change; we’d prefer a more predictable environment. But if you can get past that, you’ll be able to take advantage of the opportunities that are going to arise, and that’s what I’m going to talk about today.
How the Rich think differently
There is a classic book by Napoleon Hill that I recommend you read called Think and Grow Rich.
While it was written almost 100 years ago, you will find it on the bookshelf of almost every successful investor.
Now there is a good reason why the book is called Think and Grow Rich and not Get a Job and Work Hard and Grow Rich. It’s because the rich think differently to most people and those who work hard at a job don’t end up rich.
So let’s look at the difference between wealth-generating thoughts and impoverished ones.
The Rich think Big Picture, while the Poor get lost in Detail.
I frequently see the rich do well by recognizing opportunities, while the poor get bogged down and distracted by all of the finer points. This often means that all they end up seeing in a given situation are obstacles or problems.
The Poor trade their time for money, while the Rich work their money.
The only way the average Australian knows how to get more money is by working harder; by trading hours for dollars - they either work more hours or get a second job.
The rich invest in assets like property that increases in value and brings in money whether the owner works or not.
The Poor think Cash Flow, the Rich think Assets.
The poor build their cash flow while the rich build their asset base (like their investment property portfolio).
The poor spend their cash flow (the money they earn after paying tax), while the rich spend their capital or money generated by their assets.
The Poor save their Money.
The poor save their money thinking it is a way to become wealthy.
On the other hand, the rich are comfortable borrowing and using leverage to buy appreciating assets.
The Poor decrease their Debt while the Rich increase their Debt.
The average Australian is scared of debt.
The rich realize that they become even more wealthy by owning assets that increase in value, such as well-located investment properties.
The Poor try to pay off their Home.
Your home is an appreciating asset and the only way most of us can ever buy a home is by taking out a mortgage, so even though your home loan is not tax-deductible, it is not bad debt - it is “necessary debt.”
The rich recognize this and don’t strive to pay off their home loans.
The Poor like to Trade.
The poor try to make money through trading - through buying and selling.
Whereas the rich understand that they make more money by holding onto their assets and never (or rarely) selling. They realize that they can refinance against the appreciating value of their properties.
The Poor think Scarcity while the Rich think Abundance.
The truth is that money is just energy, an exchange for value.
If you make the mental shift
that money is limitless, that it can be invented and generated on
demand, in line with the value you provide, it will open up all
sorts of possibilities.
The Poor believe that Life Happens to them, while the Rich believe they Control Their Lives.
The rich believe they are the pilot of their destiny while the poor feel they are just a passenger being taken along for a ride in the flight of life.
The Poor think Small while the Rich think Big.
The rich think big. They take responsibility. They play the game to win and they do well.
When you think like a rich person you have big visions and dreams, you focus on doing what you love and are most passionate about.
The Poor want to be Rich, the Rich are committed to wealth
The poor want to be rich, while the rich are committed to becoming wealthier.
The Poor are scared of Failure.
The poor have a fear of failure - they see it as something bad.
The rich know that on their way to becoming financially independent they will have moments where things won’t go according to plan - what I like to call retracements.
Just because something doesn’t work out, it doesn’t mean you have failed.
Nor does it mean you are a failure.
It simply means you have found another method or approach that doesn’t work, and this discovery brings you one step closer to making sure it will work the next time.
The Poor think they know it all and don’t need to be taught to become wealthy.
The rich know they can always learn more. They are constantly asking questions and seeking answers.
So what now?
As you can see, you need to develop a very different mindset if you want to become rich.
So how do you start to evolve your mindset? Well, you will need to take the following three steps...
Become aware of what’s working for you – the thoughts, actions, and behaviors you want to keep and the things that haven’t served you so well in the past – those aspects of your internal dialogue you want to change.
Model yourself on other successful people – people who have already achieved what you want to achieve.
In other words, the fastest way for you to become financially successful is to adopt the thoughts, behaviors, and actions of people who are already there.
Now it’s time to act on your new positive beliefs. This process is commonly known as Be, Do, Have.
You become the person you want to be as soon as you start thinking and acting like that person.
If you want to become wealthy, become wealthy in your mind first (be that person), then behave the way wealthy people behave – do your wealth act.
Links and Resources:
Shownotes plus more here: What the rich are doing to position themselves to get richer in the Roaring 20s
Some of our favourite quotes from the show:
“The rich have a big picture outlook on life in general and their investments in particular,while the poor think in a more detailed way.” – Michael Yardney
“The rich don’t get a second job. They send their money out to get another job to work for them.” –Michael Yardney
“When you move from the realm of desire or wanting, to the realm of commitment, ambition, then you’ve got no choice. It’s not negotiable. You’re going to get there.” – Michael Yardney
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