This is the basic question including me all of us need to ask when we think about our finance. Let us analyze the reasons behind this. The inspiration for this post is the book “The Millionaire Next Door” written by Tom Stanley and William Danko. Even though I have not fully read this book but few points forced me to share those wonderful ideas with you all.
1) Live well below our means-This is somewhat we all need to follow seriously, especially the younger generation. We tend to be more expensive than our earnings. We buy the products which will give us satisfaction only for few hours or days. But we buy them to show to the society that we also can afford (but not easily 🙂 ). Buying expensive mobiles, unwanted weekend shoppings and there by buying useless items which we neither need them nor they actually add value to our life. We all work hard to earn money and at the same time we “WORK HARD” to spend all that earned money. Strange but the reality. When we look for our current financial status, we find that we can’t survive even for a month without salary. But still we are so crazy to spend whatever we earn. Buying is necessary but we first need to analyze whether this buying is actually our need or for the status symbol. So economical buying will be the secret behind successful financial life.
2) Allocating more time and money efficiently in building wealth-This is missing in young generation these days. They work hard and spend also but they invest some part of their earnings may be due to parents compulsions or for tax saving purpose. But they never do the homework required before investing. We are all working for around 60-70 hours a week to earn money but we forget to work out on where to invest that money. So there is no short cut to success until we learn how and where to invest.
3) Financial independence is more important than displaying high social status-Yes these days we want to show to our friends, neighbors and relatives more than what we are actually. But in return we are ruining our financial life. It is like rat race to show that we can afford the costly gadgets, costly family meal, costly international tour or costly lifestyle.
4) Not accepting parents financial support-This is somewhat we follow when have huge crunch of cash. But this again makes us weak planner of our finance. The only motive behind this is making us to be independent instead of depending on our ancestor’s property.
5) Teaching your children about importance of money– When we are thinking about our kid’s future we plan in such a way that our kids may not suffer like what we suffered in past. But in directly we are providing the ready-made cushion to our kids to financially depend on us. We take admission to costly “International Schools” which only guarantee us the costly lifestyle but not the quality education. I have a question to parents who take admission in such brand schools-Will the school guarantee all children whom it admitted to make them intelligent, self reliance and leader of tomorrow? If not then why we need to run behind the status symbol race to make our kids to study in such schools?
Make your kids aware about the value of money. Provide them good education but at the same time let them understand some hard facts of life also about money. Otherwise they think that money will only come from ATM but not with hard work 🙂
6) Proefficient in timing market opportunities-This is somewhat one need to apply once you understand the above points fully and start to work on your finances. There will be always opportunities but finding them will again require knowledge and research and these will not come until you spend time on your money matters.
7) Choosing right profession-Choosing your interest and hobby as a profession is different than choosing the profession which gives you money. You look around the successful people and you notice that they are just mad about the profession they are in. Reason for such madness is they love so much so that “They eat, drink and sleep with what they are doing and took as a profession“. Whereas a normal guy forced to do the Engineering or MBA only to satisfy his parents or to get a decent job so that he get live the non-risky life.
Hope above points are actually an eye opener to all 🙂