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NOTE: This is a lesson in a series of 40 lessons in the free Man the Ship self-help framework. It teaches you how to be happy, healthy and wealthy in all areas of your life: physical, mental, spiritual and financial. Be sure to do the lessons in order because they build on each other. Click here to start at the beginning. To your growth!
It’s important that you’re financially healthy because money affects so much of our lives. Being financially healthy is 80% attitude and 20% knowledge.
The Right Attitude
The right attitude you need to develop is one of stewardship. Be a good steward of your money. Realize that it isn’t yours but you’re only managing it while you’re alive. That keeps you balanced and humble. Manage it well and use it to take care of your needs and wants for now and in your future and then give it to your family or charity when you pass. Don’t let money go to your head. As Jonathan Swift said, “A wise person should have money in their head, but not in their heart.”
Money Isn’t Evil
But money isn’t evil either. The Bible verse is usually misquoted. It doesn’t say money is the root of all evil. It says “For the love of money is the root of all evil” (Emphasis mine) (1 Timothy 6:10 KJV).
Money is just a tool that we all need to use. You need to face money head on. Control your money or else it will control you. You need to keep it on a short leash. Be its master or else it’ll be yours. And as Francis Bacon said, “Money is a great servant but a bad master.” Like with the other spheres, you need to manage your finances intentionally.
The Right Knowledge
Once you get the right attitude, the path to becoming wealthy is straight forward. Most Americans have the wrong idea of how people become rich. Many people think the rich got there by inheriting it. Being born into the upper class. Or striking it rich with lucky stock picks. From making a lot of money at their jobs. Or from borrow their way into wealth. The facts are different though.
Habits of Millionaires
Dave Ramsey did the largest study of American millionaires between 2017-2018. Some of the key findings are below. Of the 10,000 millionaires surveyed:
- 79% did not receive any inheritance. While 21% received some, only 3% received an inheritance of $1 million or more.
- 63% never took out a home equity loan or line of credit.
- 9 out of 10 had never taken out a business loan and didn’t have credit card debt, student loans or car payments.
- Eight out of 10 became millionaires by investing in their employer’s 401(k) plan.
- They worked, saved and invested for an average of 28 years before becoming millionaires.
- Three out of four millionaires said slow, consistent investing over a long period of time is the reason for their success.
- Eight out of 10 millionaires came from at or below middle-income levels.
- 69% averaged less than $100,000/year.
It’s pretty much the opposite of what most people think. And pretty BORING. Most rich people are ordinary Americans like me and you. The vast majority got rich slow not fast.
How to Get Rich
They got rich by following a basic set of principles. I’ll teach you each more in detail as we go through the lessons but here’s the short list:
- Spend below your means
- Keep a budget
- Save up an emergency fund
- Have no debt except a mortgage
- Invest into retirement funds
- Save and invest for kids’ college and other general expenses
- Spend, give and be generous
That’s a clear path to success, isn’t it?
That’s been my path. Born and raised lower middle class. Didn’t receive any inheritance. My wife and I both had student loans but paid them off quickly. We had two car loans (biggest financial mistake we’ve made). But paid those off years ahead of schedule and will need have car loans again. We’ve never taken home equity loans or carried credit card balances. We built our dream home in an up and coming sub-division and it’s been a great investment. We’ve invested in our jobs’ 401(k)’s for 20 years. We live well below our means but enjoy hobbies and family travel. We put thousands of dollars into savings and investments a month. Our finances have been boring but intentional. We’re on track to become everyday millionaires within the next ten years.
Let’s move into the tasks. These may be daunting. But they’re important to work through. I designed them to be do-able but slightly push you out of your comfort zone if you’re not a “money nerd”.
TASK: Read this article on the Ramsey millionaire research project. Very interesting and worth a read. There’s also a book that you can optionally read. Also read these 46 inspiring quotes on money. Uplifting and insightful.
QUICK INFO: Gross income is your pay before any money such as taxes or 401k contributions is deducted. Net income is gross income minus deductions and is your “take home” pay.
TASK: Track all your income and expenses for one month. It doesn’t matter how you do it. Write them down, put them in a spreadsheet, or keep receipts. But track everything down to the penny. Track all money that comes in and goes out. Keep this information because we’ll work with it as we move through the steps. Plus it gets you into the mode of paying attention to how your money is flowing.
TASK: Find your gross pay and net pay from your last month’s pay stub. Document in your journal.
TASK: Calculate any amounts deducted from your gross pay (taxes, 401k contribution). Document in your journal.
TASK: Think about the state of your finances. Are you happy with it? Do you have any concerns? Do you want to make any changes or achieve anything with your finances? How does thinking about money make you feel? Write your thoughts in your journal.
OK, let’s call this lesson a wrap. Let me know in the comments or via email if you need help with anything in this lesson. Also, what’s been your relationship with money? I want to hear your story in the comments. When ready, click the link below to go to the summary of Step 1. Good job for getting this far. Proud of you!