When it comes to getting results, it is tempting to look for steps or formulas. This at first sight looks like the quickest way to get the results you desire. But the reality is, it is actually the longer route. Steps and formulas are fabulous, but if you lack the self discipline, focus, commitment and persistence to follow through, you will not cross the finish line. All you will have is a series of failed attempts.
Success in any field of endeavour is 80% behaviour and 20% head knowledge. This means the ability to do it constitutes 80% while the how to constitutes the remaining 20%. The ability to carry through has much more weight than the how to. Until you develop the pattern of behaviour or habit to take sustained action, head knowledge is not of much use. This includes developing the behaviours or habits in becoming rich.
Human beings love short cuts, taking the easy way out, following the line of least resistance. That is why it is never crowded in the extra mile. The minority will always control majority of the resources anywhere there is free enterprise. Attaining the level whereby we have the ability to follow through takes longer and is much harder work than learning a formula. You can get the steps in two days, but it will take months and sometimes years before you can actually follow through. That is why almost everyone knows what to do to lose weight but few actually lose weight and stay that way. Psychology is where we often drop the ball. The right formula with a wrong mindset is a recipe for failure and frustration. To develop psychologically, we have to pay the price in personal growth and development. Life is lived at levels, and the level you belong determines what you can do.
In an army, the private has different attributes from a Sergeant, Captain, Colonel, Brigadier General, full General etc. Each rank operates at a different level, has different attributes and expected behaviours. A private takes orders, a Captain can lead a Platoon etc. A General can command a whole Division, and in actual combat, a combined task force of Army, Navy and Air Force. The higher you go, the more is expected of you. To rise in rank, you have to take on more responsibilities and perform well. If per chance you become a General but behave like a Colonel, you will soon be demoted or worse, court-martialled if your actions inaction has dire consequences. It means the shoe is much bigger than you.
When it comes to getting rich, you have to be a millionaire before you can have millions. That means you have to become a millionaire on the inside before the millions manifest on the outside. It means you must acquire a millionaire mindset, think like one, act like one and ultimately you will become one. If you don’t think like a millionaire, you cannot act like a millionaire. If you do not act like one, you will not get the results millionaires get – millions of dollars.
Imagine for a moment that you bypass the process and become one, e.g. win the lottery etc. You can guess the rest of the story. The money will be gone pretty soon. A fool and his money soon part ways. What happened?
You do not have the ability to hold onto the money. You will relate to the money with a poor or middle class mindset, meaning go shopping, feel good, show that you have arrived. By the time you have finished indulging your fantasies, the money is long gone. A millionaire will make more money with that same money. That is the difference.
If you are not a millionaire, if millions come your way, you will give it away. It is not in your character to hold and multiply money. That is why you have precious little to show for all the years you have been working. You can now imagine the futility of trying to make more money when you cannot keep and multiply it. You would be like someone running hard on a treadmill but going nowhere. It is a vicious cycle. No wonder it seems like the rich get richer, the poor get poorer and the gap gets wider.
The sustainable way to become rich is to first invest in your personal growth, development and financial education. When the knowhow meets the ability to follow through to the end, miracles happen. What is the point knowing what to do when you cannot do it? A pregnant woman needs strength to deliver. There is no caesarean section when it comes to success. You have to deliver normally. Knowing what to do gives you wings. Having the ability to do it successfully is the wind beneath your wings. Without the wind, you cannot go far.
Knowing how to do it is the easy part. Actually doing it successfully is where the rubber meets the road. This is what separates the men from the boys. Herein lays the missing link.
– Usiere Uko is editor of www.financialfreedominspiration.com and author of Practical Steps to Financial Freedom and Independence – www.amazon.com/Practical-Steps-Financial-Freedom-Independence/dp/147006832X .
Most people tend to think that when you are rich, you have a lot of money. You can look rich – drive flashy cars, own houses and be worth hundreds of millions but be broke and struggle to pay your bills or your children’s school fees. I know some people a while back who looked rich but used to shake out their trouser pockets in the wardrobe to look for money to buy petrol for their car. People like this are referred to as asset rich, cash poor. They do not have enough cash.
Most people look for capital gain when it comes to investing. Net worth is based on estimated value rather than actual cash flow hence one can be rich and still be broke, worth millions but at the same time, contending with past due bills. A minor financial crisis can cause them to dispose off their assets at a giveaway price. Negotiating property price with an owner who desperately needs the money is every buyers dream. When they sense the desperation, they lower their bid. The buyer calls the shots. He who has the gold makes the rules.
Cash flow is the lifeblood of every business and personal finance. The moment a company runs out of cash, it is headed for bankruptcy despite projected earnings and profits for that year. You get to hear about terms like “paper profits”, profits not backed by money in the bank. The moment the company cannot make payroll, pay its suppliers and catch up loan repayment, the company is gradually going out of business. In mergers and acquisitions, the cash rich partner dictates the terms. You find seemingly smaller companies acquiring bigger companies or becoming the senior partner in a merger. It is a matter of cash. Smaller cash rich Exxon became the senior partner in the ExxonMobil merger (Mobil was asset rich and cash poor). Here in Nigeria, smaller cash rich Standard Trust Bank (STB) took over asset rich but cash poor UBA and retained the UBA name for brand recognition purposes. It also holds true for individuals. When you are cash strapped, you negotiate from a position of weakness. When there is no dime in your pocket and your bank account, your self esteem suffers, no matter how exotic your automobile or which neighbourhood you live. You live life on the edge, always afraid that something will give. You are not far away from embarrassment.
The real rich invest for cash flow while the poor and middle class invest for capital gain. More often than not, capital gain is outside your control. Capital gain is often a perception driven my market sentiments. Capital gain is on paper, an opinion based on what the market is saying at that point in time. It is only realized when you cash in. Since the value placed on an asset is often an opinion, the reality is that you often get less when you cash in. Opinion is often worlds apart from reality. In the real estate market, the true value of your property is the best offer a buyer is ready to pay. Until you see the colour of the money, you cannot say for sure what your asset is worth. Even in the stock market where published stock prices are not opinions unlike the real estate market, a stock may be this price today, but the moment you ask your broker to sell, the price may drop at the point of executing that order. You can feel on top of the world that you are worth this much, but the moment of truth comes when you actually convert your assets to cash. For household items, the rule of thumb is to assume it is worth 10% of purchase price. This is one of the key reasons net worth is not a true indicator of your financial health. The value you put on your asset is an opinion. When you invest for capital gain, you are investing based on opinions, not facts. The price movement is not under your control. You can only hope and pray that the market sentiment favours your projections. Your financial plan is based on hope.
When you focus on investing for cash flow, you have control over when you exit the investment. You negotiate from a position of strength. If the price is not right, you can afford to walk away and wait for when the price meets your exit parameters for the investment. While waiting, you still enjoy the cash flow from the asset. When you invest for cash flow, you usually get capital gain as a bonus. For example if you own a rental property, you get cash flow from rents, and the property can also appreciate in value. You are not under any pressure to sell. That goes back to the common sense definition of assets – anything that puts money in your pocket, in essence eating your cake and having it. If your investment does not generate cash flow, you are putting yourself in a financially weak position. When you invest for cash flow, you hardly go wrong. Cash flow is king. Do not run out of cash.
– Usiere Uko is editor of www.financialfreedominspiration.com and author of Practical Steps to Financial Freedom and Independence – www.amazon.com/Practical-Steps-Financial-Freedom-Independence/dp/147006832X .