Looking for money lessons on how to get rich in 2020? If so, there’s some critical facts you’re going to need to know.
Money and Mindset
Money problems are ubiquitous in the US these days. For instance, consumer debt in this country is now hovering at around $4 trillion. Student loan debt has also spiked to an astounding $1.5 trillion.
That’s trillion…with a “t!” This unprecedented level of debt reveals the dire financial situation of millions of hard-working Americans.
People are struggling to make ends meet, put food on the table and keep a roof over their heads. Money is tight, loans are taken out, and the ensuing burden of debt only adds to the trouble.
Thankfully, a few money lessons can transform your mindset – and your money.
In some ways, it’s no surprise that money is such a common problem for people. Why? Because, more often than not, we’re never taught how to properly manage it.
Money Lessons to Get F*cking Rich
It’s time to rectify that predicament. Want to take control of your finances and improve your financial situation?
Read on for 8 essential money lessons that every adult should know if they want to get f*cking rich.
1. Your Feelings Toward Money Matter
Sometimes, financial problems run deeper than we think. They often come down to our personal perceptions of money.
The way we think about and act with cash is largely impacted by our history and the ideas that our parents passed down to us (and that their parents instilled in them).
It’s important to understand this relationship. Start to reflect on your own feelings about financial matters. Take stock of your underlying beliefs and attitudes.
- Did you parents teach you that money was abundant or scarce?
- Did they teach you that it was hard or easy to get?
- Did they teach you that you could change your income level by changing your skill level?
- Did they teach you how to negotiate a raise or ask for a promotion?
For example, if you were raised in a very frugal household, you might feel guilty about spending your money in adulthood. This is especially true if your parents worked extremely hard, saved rigorously, and never spent unnecessarily.
However, there are times that you should spend your money, such as:
- To learn new professional skills
- To make personal and social connections (networking matters)
- To buy assets that will pay you income
- To hire great professionals, like tax professionals who can help you save money instead of paying it out to the IRS
Conversely, if your parents liberally spent the money that they took in and didn’t allocate 10-40% of it to buy investments that would secure their financial future, then you’re going to have to shift your belief that you’re “allowed” to spend all of what you make.
The point is, I would highly encourage you to explore your beliefs around money by talking to your siblings, friends, and if relevant, your partner. You might just realize that you have a few feelings around money that you’re ready to change.
2. Talking About Money Is Crucial
This money lesson is important, because money remains something of a taboo subject. Few people run around telling others about their financial situation. They worry what people around them will think.
However, everyone I know who is financially successful openly talks about money.
Successful people want to learn more about it. They want to help others. They want everyone to do well and share in the abundance.
The thing is, there is no reason for the topic of money to be taboo.
Personally, I’d highly encourage you to share your financial goals with someone you can trust, whether that is a friend, partner or family member. It could also be a mentor—ideally someone who has already achieved what you would like to accomplish.
Also, couples must learn how their partners’ childhood experiences with money influence their financial priorities and beliefs.
Remember, communication enhances every area of life.
Communicate about money with people you trust. The type of people to keep around you are those who encourage you to grow your income, build your investments, and increase your financial knowledge.
3. Live Below Your Means
This money lesson is fundamental for anybody learning about finance.
Living below your means is about going a step further than living within them.
In other words, spend less than you earn and set the rest aside.
It’s a basic personal finance tip, but one that many people forget. Indeed, almost 60% of people in the US have under $1,000 in savings.
That’s a scary statistic. After all, an emergency—or a global pandemic like the coronavirus—might be just around the corner.
Adjust your spending habits. Make it your mission to free up enough cash each money to set aside for emergencies.
4. Learn the Difference Between an Asset and a Liability
This simple distinction can make a big difference in your financial life.
Here’s the basic idea: An asset puts money in your pocket while a liability takes it out.
Let’s get more specific, though.
Assets can come in two types: tangible and intangible. That means they’re either something concrete that you own (be it a car or a property) or something intangible (such as stocks and shares), respectively.
Liabilities are things like debt, bills, and taxes.
It goes without saying that maximizing your assets and minimizing your liabilities is key to having more money in your pocket.
After all, if you can pick up assets and set down liabilities, then financial wealth will follow close behind.
5. Automate and Withdraw Your Savings First
This money lesson is all about automation. While a lot of people preach budgets, I’m not a huge fan of them. There are two reasons for this. First, few people follow them, and second, people rarely account for the magnitude of life’s worst events.
For example, what happens if a pandemic like COVID-19 hits the globe after decades of prosperity and it’s hard to get a job for months or maybe years? Did you really budget not to have a job for this long? Be honest with yourself. Probably not…
Instead of budgets, there is a better and more reliable approach.
Simply automate your account to withdraw the amount you want to save each time your paycheck hits your bank.
Have your bank automatically move that predetermined amount of money into a “sacred account” that you don’t touch for any reason other than pushing it into investments.
The government does this to you. They withdraw their share of your paycheck (the taxes that you owe) before your money ever hits your account.
Trust me, your future self deserves the same level of commitment.
The best part of this approach is that what makes it to your bank account, you get to spend. So enjoy!
6. Focus on Increasing Income
Money lesson number six is critical to winning the game of money.
It comes down to this: Focus on increasing income over saving.
Why? Because there’s no limit to how much income you can generate, whereas your potential to save is limited by your earnings and spending habits.
Meaning, you can only save to “zero” but you can earn a potentially unlimited amount.
Of course, there’s a time and place for saving too. But in reality, it’s your income that holds the key to true financial freedom, so work hard at increasing your cash that comes in every month.
There are many different ways to increase your income, including:
- Learning new skills so you can command more in the marketplace (this is my personal favorite!)
- Negotiating a raise
- Asking for a promotion
- Receiving a performance bonus
- Applying to a new, higher-paying job
- Participating in commission-based work
- Being paid for referrals
- Taking on part-time work
- Getting a second job
- Buying income-producing assets
- Working with a mentor who will guide you toward higher paying opportunities
And the list goes on.
Trust me on this life truth: Your income is not set. You can and should increase it over time.
You do this by increasing your skills, increasing your commitment and delivering ever-increasing value to your boss, your clients or the marketplace at large.
7. Learn How to Create Multiple Flows of Income
What’s better than one high-earning source of income?
Multiple sources of high-earning income, right?
Having money flowing in from different places helps in numerous ways. For one thing, your earning potential increases.
Imagine a river with lots of tributaries flowing into it. Each tributary contributes to the river’s overall magnitude. The more there are, the bigger the river becomes.
It’s the same deal with your bank balance.
Of course, it also mitigates financial risk. The river keeps on running even if it loses a tributary or two.
It’s long been known that the average millionaire has seven or more streams of income. So, you’ll want to learn this skill today.
Again, there are lots of ways to create multiple flows of income, such as:
- Earned Income – This is active income you make at your job.
- Business Income – This is money made from running a part or full-time business.
- Capital Gains – This is the profit made from a selling an asset at a higher price than you bought it. You can make capital gains from selling things like a house, land, art, vehicles, clothes, etc.
- Distributions – This is money that you get paid for owning a share of something profitable, such as a company, land, or property, for example. It could also be money you take out of a retirement account after reaching 59.5.
- Dividend Income – This is money that you are paid for owning shares of a company.
- Interest Income – This is income you make from lending your money out. This could be in the form of bond, a CD, peer-to-peer lending, or any other approach.
- Rental Income – This is money you make for renting out a room, a house, a vehicle, a parking space, etc.
- Royalties / Licensing – This is money you are paid when someone else uses something you created.
And the list goes on. If our parents and teachers had simply taught us there were other ways to make money than earned income, then I’m confident everyone would be going after it.
The good news is, this is an easy skill to learn and I’m here to help you!
8. Learn About Taxes
A quick money lesson to finish up: Taxes are one of the biggest expenses in your life.
Between federal income tax, state income tax, and state and local sales tax, you may see as much as 50-60% of a dollar go out the door to the IRS.
Specifically, federal income tax can go as high as 37%. State tax can go as high as 13.3% (California), and state and local sales tax can go as high as 9.53% (Tennessee). Plus, there’s property tax, estate taxes, inheritance taxes and many more.
The good news is that taxes can be variable. Let’s face it, taxes serve a purpose. They contribute to public service as well as the overall well being of society.
But, there’s no point paying more tax than you need to. You’re not required too, and technically, you’re not filing correctly if you do.
Don’t assume that you have to pay your current level of tax.
Remember: limit your liabilities. A financial adviser may have numerous ways for you to cut your annual tax bill.
Plus, you are more than capable of learning about tax credits and deductions. For example, owning your primary residence, owning rental properties, donating to charity, taking a home office deduction, or driving your car for work can all save you big come tax time.
Money Lessons Matter
Finances are tight for millions of Americans. Thankfully, they don’t have to stay that way. Learning about finances can go a long way toward creating financial freedom in your life.
Hopefully, the money lessons in this post will help you do exactly that.
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