Thinking like a millionaire: the 3 financial types of people in the world

There are 3 types of people in this world when it comes to finances. They are the Perpetually Broke Person, the Wealthy Person, and the Highly Rich Person.

The perpetually broke person never has any money and ultimately lives paycheck to paycheck. This is sometimes due to financial hardship, but these people exist on all pay scales, since the perpetually broke person always spends their income immediately after receiving it, and the amount of income is less important than how quickly they spend it. . These are mainly consumer goods like clothing, electronics, and other items that can drain a bank account quickly. Another aspect of perpetual bankruptcy is that they are incredibly good at giving away their future wealth by taking out loans for things they don’t need or can’t even afford, like new cars, home improvement projects, vacations, and getaways.

The Wealthy Person is the next step up and they do much better financially than the Perpetually Broke Person as they know how to manage their money by saving it for emergencies and big purchases. They also have good credit scores because they pay their bills on time and know how to borrow responsibly. This allows them to build wealth slowly and live well for most of their lives. However, because the affluent usually relies on her job, she may find herself in dire straits if she is laid off, injured and unable to work, or has other costly events that drain her savings. This is mainly due to the fact that they are afraid to invest in anything but safe things.

The very rich person, on the other hand, knows how to manage their money by having an emergency fund, has a high credit score by paying their bills on time, and knows how to borrow responsibly like a well-off person. The only difference is that Highly Rich People know how to make their money work for them with or without them. They understand these 3 Principles of Money.

Director One: You can’t do everything yourself.

When building wealth, the most important principle to keep in mind is to understand that you can’t do it all yourself. So when you make money with your money, it’s important to know that you need to delegate a lot of the work to other people. Especially when hiring people. For example, in real estate, you hire contractors to do repairs and renovations and hire a property manager to manage your purchases and retentions. You do this because even if you know how to do it, it doesn’t make any sense to you. Why focus on just one or two properties when you can have ten working for you with the right people in charge? In stocks, why would you learn how the market works and go online when there are people you can hire to do it for you 24/7? Instead, have fun.

Principal Two: You have to take calculated risks.

Principal Two simply means that you have to risk money to make money. If you don’t risk anything, then you can’t do anything. This is the pinnacle of investing and what stops many people from doing it. As they are more concerned about losing a hundred dollars on a bad investment and would rather spend a hundred dollars on something worthless that they don’t need. This makes many investors afraid to pull the trigger when investing and fall for the fallacy of the perfect deal. Where they will reject even the best offers because they believe there is a better one on the horizon. The only way to overcome this fear of losing your investment is to incorporate the concept of sunk costs. Sunk costs are costs you’ve invested in an effort that will never pay off and you’ll never get them back. The idea behind sunk costs is that even if they’re lost forever, it shouldn’t affect your decision to write off the investment. If it’s not going to work, it’s not going to work and you need to accept in advance that the funds spent were a calculated risk and were expected to be lost if it failed. Accepting sunk costs will allow you to avoid spending good money on bad money.

Principal Three: If you can’t understand it, then don’t invest in it.

Too many people get excited about something. They listen to too many experts on the subject. Too many experts in the news. Too many “experts” in their family and friends. And they find themselves putting all their money into something they don’t understand. This can be due to complicated companies, products they use but don’t understand their business model, and other financial instruments that are difficult to explain, let alone understand. This is why many investors need to stick to what they know. If it’s stock, keep the stock. If it’s real estate, stick with real estate. If it is a business or a company that you know from start to finish, stick with it until the end. The idea is that you should understand an investment, how it works, and its ability to grow in the world we live in before you invest in it. This implies having to investigate the subject, knowing its past and present, and the main things that can affect it. The only way to make sure you don’t get screwed is to have at least a basic understanding of what you’re investing in.

Conclution:

Knowing what financial type of person you are will let you know where you need to go from here. Knowing if you spend too much money and blow your budget means you have to create financial discipline. If you’re on the defensive with your money but seem to want more, then you need to start thinking about how to take more calculated risks. If you’re rich, you need to find better investments for higher returns so you can do more than you ever imagined possible.

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