the secret to money the wealthy know (and you don't)

Photo Credit: Epicurrence via Unsplash

Photo Credit: Epicurrence via Unsplash

If you read nothing else this week, read this.  Your bank account and future self will thank you.

I have a great job with a pretty great salary.  It’s given me the means to experience some amazing things (like travel to Peru) while still being able to fund my retirement and add to my savings. On top of that, I rent out a spare room in my home, meaning that when it comes to the financial side of the life equation, I’m doing fairly well (knock on wood). And yet. 

Yet here I sit in a home much smaller than those my friends are buying.  I drive a car that is 11 years old. I only get my hair done every 6 months.  I shop at H&M and Target because the prices at Nordstrom still make me cringe.  I take my lunch to work. Every day.

Seems crazy, right? I have the means to live exponentially better than I do now, and yet I’m still so frugal you’d think I was barely scraping by.  I could afford the monthly payment on a new car.  I could buy a bigger home.  I could shop at J. Crew and Anthropologie and Lululemon.  I could live without split ends. But I don’t.  And it’s because I learned this secret at a fairly young age that I’ve been able to amass a net worth of $200K (20x the national average[1]) before my 30th birthday.  A secret that is easy to understand but many choose to ignore.  A secret that has transformed even the most middle class of us into millionaires.  And this is that secret:

You can have it all.  You just can’t have it all right now.

Just what you wanted to hear, I’m sure.  Let’s be honest, we millennials are a generation of “we want it” and “we want it now.”  We’ve grown up in an age where everything is just a click away (Steve Jobs, we’re blaming you here), and it’s rewired the way we think. We LOVE instant satisfaction, which is why most of our friends are buying the new cars and 4 bedroom homes and fancy vacations all before the age of 30. And really, why wait? For some of us, we can easily manage a $400/month car payment and still have money to go out on the weekends.  Killing it, right?

Well, maybe.  But maybe not.  See, the problem is that by spending that money now, you negate spending more of it later.  Because you want the nice clothes and latest iPhone and best Crossfit membership, you are more than likely skimping on funding your retirement or building your emergency fund or saving to put 20% down on a house.  And you know what that means? It’s costing you extra money. And potentially YEARS of retirement.

Think of it like this:  all that money you’re spending on rounds at the bar could have been thrown into savings and used as an additional down payment on your home.  Now, however, instead of putting down 20% to get a lower interest rate and avoid PMI (i.e. things that will save you serious cash), you can only afford 10%, meaning you are losing thousands every year that those of us 20%-ers don’t have to worry about. 

Or, let’s say you haven’t quite gotten around to building an emergency fund. No big deal…until your company gets acquired, and suddenly you lose your job with nothing to fall back on. You end up having to take a job just to pay the bills, but damn, do you hate it.  Out of nowhere, you’ve found yourself in a situation where you dread going to work in the mornings and are maxing out your credit cards just to stay above water. Sucks, right? It’s more common than you think.

If you truly want to “have it all,” you need to become a master of delayed gratification, meaning you have to be willing to give up a little now in order to get a lot later.  I know, easier said than done, but it's a habit that can be learned.  And coming from someone who knows, the promise of financial stability and more “fun” money down the road is definitely worth it. All it takes is a little willpower.  And I’m here to show you how to develop it.

SET GOALS THAT SUPPORT YOUR “WHY”

You know which are the easiest promises to break? The ones you don’t care about.  And the same thing goes for your goals.

If you don’t set a worthwhile financial goal, there is no way you will sacrifice your wants and needs now for your wants and needs later. Yes, we can all say we’d like to be debt free, but honestly, the promise of nixing a $300 monthly payment doesn’t really make sacrificing our current Thursday night happy hours or weekly personal training session very worthwhile. 

That’s why you need to figure out your “why.” Why it’s important to reach your goal. Why you want to be on better financial footing. Why giving up your time and energy now will be worth it down the road.  For instance, let’s say your goal is to pay off debt. Great. I’m all for it. But if that’s where you leave it, you’re not going to find the motivation to stick with it. You need to figure out the root cause behind why you want to free up your cash.  Is it to use that extra money to save for a house so you can expand your family? Finally take a honeymoon? Just be able to go out to dinner and buy a pair of shoes without feeling guilty?  Whatever it is, make it something you are 100% behind and ensure that reason is the focus of your efforts.

SET REMINDERS

Day to day life can sometimes get in the way of our long-term goals.  You get last minute invites to happy hour after a stressful day, opportunities to donate to a friend’s charity, or find a really expensive pair of shoes on sale and all of a sudden, you’ve blown your budget.  Again.

That’s why setting reminders of those long-term goals is so important: it keeps you focused on the end goal.

Here’s what you need to do: change your desktop background to a picture that represents your why.  Do the same for your phone.  Put an actual photo up somewhere in your house or in your wallet next to your credit card. Heck, even set periodic reminders on your phone.  These little reminders will keep you on the straight and narrow, and when you pass by those boots you’ve been eyeing at Nordstrom, you’ll have a much easier time walking away.

NET WORTH CHALLENGE

Here’s the competitor in me coming out again. Most people believe that having a high salary is what makes you wealthy, but they’re wrong; it’s your net worth (assets less liabilities) that’s the most important number when determining true wealth.  And for me, getting that number to increase has been one of the most motivating factors in sticking to the delayed gratification course.

A higher net worth means a lot of things to different people: an earlier retirement, the ability to fund their kids’ college, the means to travel.  Whatever it is, having a higher one is always going to be a positive, and focusing on this will allow you to truly see the progress you are making.

 BUDGET

Yes, this will be reiterated until you actually do it. 

Budgeting is the #1 way to ensure you are getting the most out of your money, and when you have financial goals you want to hit, that’s hella important. It’ll also allow you to squeeze in a little fun while you’re in sacrifice mode so that you don’t absolutely hate your life until you’ve hit those goals.  Because as much as we’d all love to eat Ramen every day in order to pay off debt, we have to also try to keep our sanity during the process. That’s hella important, too.


Having your cake and eating it, too, is possible – it’s all just a matter of self-control and willpower.  If your “why’ is strong enough, you’ll find it’s easier than you thought to give up a little now to gain a whole lot later.  So find your “why,” set your reminders, and get ready for the challenge.  You’re going to get everything you hoped for - you just may have to wait until later in the party to have the whole piece.

What are some of the financial goals you’re chasing? And what are you doing now to reach them?

Photo Credit: Epicurrence via Unsplash

Photo Credit: Epicurrence via Unsplash

[1] Stoffel, Brian. “The Typical American’s Net Worth by Age: Here’s Where You Stand.” 26 Jan 15. The Motley Fool. 24 Jul 16.