Money (MP) If you work, earn a living wage, and by the weekend you’re broker than a jailhouse dog – you’re probably in the lower middle class ($60K). No matter what anybody tells you if nothing changes you’ll live a check to check existence for the rest of your life. However, it’s still possible to change the financial direction of your life. What got you there may not be your fault, but what’s keeping you there is… I’m talking about the “middle class” mindset. Let’s have a look at this mindset and how to get out of it. Forever! You may have heard that old proverb, “Give a man a fish and you’ll feed him for a day but, teach him how to fish and you’ll feed him for a lifetime.” Which bears to mind today’s discussion it’s about growing out of the type of thinking that keeps you stagnate.
Most people live under the misconception that if given a million dollars they’ll be rich. Well yeah, maybe for a short time! But the million-dollar question is: If you had $1 million dollars – what would you do with it? The truth of the matter is that if you have an impoverished mindset –a million dollars won’t go very far. Now consider inflation –the value of $1 million today will surely decline in the years ahead, especially if inflation skyrockets or health care costs outpaces the cost of living. Bottomline: One million dollars doesn’t go very far these days. If you take anything away from this writing let it be this: “Wealth begins in your mindset not in your bank account.” The way you think about money and your respect for it will decide whether your story ends in riches or barely scraping by in middle class. Learning to “Think like the Rich” maybe new to you but, it is doable.
Changing the Middle class Mindset
The process of changing a person’s thinking begins with understanding his/her mindset.
Case scenario #1: Subject one wins one million dollars in a lottery. He immediately has to pay 28% of his winning in taxes. This leaves him $720,000 to spend and this is how his spending proceeds during the first year:
Home (1) – $400,000 (towards paying off mortgage and/or investing in new home).
New cars (3) – $120,000
Furnishings – $80,000
Jewelry – $60,000
Vacations – $25,000
Family and friends – $120,000
Totaling – $805,000
Our middle class minded candidate has not only spent his entire winnings in less than a year but, he’s already in the hole for $85,000. One thing I can say for certain he should have read my “Poor Man’s Guide to Investing.”
Wealth begins in your mindset not in your bank account.
Case scenario #2: Subject wins one million dollars in a lottery. He immediately has to pay 28% of his winning in taxes leaving $720,000 to spend. Having a wealthy mindset he proceeds much like this:
Stocks – $100,000
Mutual Funds $100,000 (10 – 12 different funds)
CD’s $100,000 (you can’t touch it without penalties for a year)
Tax-free Bonds – $100,000
Business – $125,000 (or one of Mark Ferguson’s million-dollar rental properties)
Emergency fund $75,000 (high-yield Money Market account)
Buy a new home – $0.00
Pay off mortgage – $0.00
Totaling – $700,000 in investments
He’s left with $20,000 to play with and after one year his tax-free investments depending on the rates and fees his receipts will yield him roughly $912,000. And that’s after paying taxes on the one million and $20,000 to have fun with. Now a picture emerges that shows the difference between the poverty mindset person and the wealthy minded person. One spends his money immediately and the other invests.
“Well, rich people have money to invest poor people don’t. We’re living paycheck to paycheck,” say you. That’s not only true now but it will always be true if you keep telling yourself that. The truth is your consumer attitude keeps you in the lower middle class. Everyday, we waste money on things we don’t really need. Start saving and invest a little at a time. Even $10 or $100 will get you started on a investment portfolio. Stop saying “I can’t” and start saying “I can” mixed with positive action and you’re on your way out of the middle class.