A Secret to Creating Wealth - Focus on What You Can Control
Have you heard someone sharing a story about the woman they know who got "lucky" and started her own business at just the right time -- and, now she is making great money and lives a very comfortable life? It's as if she was just floating in a hot air balloon and happened to land in paradise.
You have power over your mind -- not outside events. Realize this, and you will find strength. -- Marcus Aurelius
Do you ever wonder if there was more to the story? You never see or hear about the actions she may have taken behind the scenes to have caused this "luck" to appear.
But, it certainly is easy to view our lives from this context (that things just happen to us), because it allows us to give up the thought that we have any control over where we end up. Everything comes down to good luck, bad luck, or no luck at all. From this standpoint, we really don't have to take responsibility for anything and there is always someone or something else to blame when things don't work out.
Be Intentional With Your Finances
It all comes down to making smart decisions with our time and money. Unfortunately, most of those success stories are not typical, but rather the rare, extreme situations that produce extraordinary wealth and/or investment gains.
What we should read about in the news is the investor who grew his wealth moderately over time through smart spending, consistent saving and maybe even a little sacrifice. In their book, "The Millionaire Next Door," Thomas J. Stanley and William D. Danko do just that, by shining the spotlight on how millionaires live.
The truth is that many self-made millionaires had to work hard (and smart) for their wealth and don't spend their money buying extravagant things. What they do spend is time -- time on strategizing about where to invest their next dollar and how to save money on an upcoming business deal. And, they most likely choose not to spend $500 on frequent lavish dinners.
Investing like a millionaire means understanding our cash flow, spending less than we make and researching the best places to invest our money. In fact, according to Brian Tracey's blog, "The average adult spends two-three hours each month studying and thinking about their money, usually at bill paying time. The average self-made millionaire, by contrast, spends 20-30 hours per month thinking, studying and planning his finances."
Create a Plan by Focusing on What We Can Control
The first step in creating a financially successful future is to focus on what we can control. That means taking our eyes off the stock market and identifying areas that we can transform within our personal financial life. Why? Well, for one thing, the stock market is like a wild animal. And, as most of us know, we can't control a wild animal. So, the chances of us tossing a few bucks into a growth-oriented investment and getting rich are pretty slim.
Success starts with focusing on what we can control. Things like monitoring our spending, saving consistently over time and increasing our income can have a dramatic impact on our future wealth. Yes, I know, it's not as exciting as finding the next Facebook (FB), investing $100 and becoming a millionaire, but it's a proven way to get to where we want to go.
Saving consistently over time will provide us with a baseline from which we can make choices on how to invest moving forward. Doing some simple planning can get it started.
%VIRTUAL-pullquote-When we are in control of our money, we are in control of our lives. %Let's say someone can save $2,500 per year at her current income and keeps the same salary for three years. That's $7,500. Now let's consider the possibility that she gets a raise or a new job and can now save $7,500 each year for the following three years. That's another $22,500 in savings, for a combined $30,000 in just six years. This is proof that a simple, consistent savings strategy can produce results over time.
When we are in control of our money, we are in control of our lives. If the future doesn't go the way we hope, then we have only ourselves to blame for it. No excuses -- either we take action or we don't. This can actually be very empowering.
One Client's Plan
Now, let's tie that into investments. The savings plan itself is completely separate from the act of investing, yet using one's savings to invest can potentially provide a boost to this money.
For example, a client of mine is saving $7,500 each year and has that money automatically transferred from her checking account to an investment account. She also has an automatic purchase plan set up inside that account, so that each time money is transferred in, it automatically buys a specified amount of a particular investment (in this case, an exchange-traded fund).
Her goal is 10 years out in the future, and we are assuming (with absolutely no guarantees) that she can earn 6 percent per year (from an historic standard, this is a rather modest). At the end of the 10-year period it is quite possible that she will have $98,856. Not too shabby when considering the alternative of leaving $75,000 under the mattress.
It's all about getting into the millionaire mindset and leveraging our cash flow to produce future wealth. When we take responsibility for the things in our lives, we gain a certain level of control, allowing us to take effective actions that will produce the results that we are committed to in life.