When it comes to money, some people have a lot and others have less. And the difference between a homeless person and a successful entrepreneur, believe me, is not luck but a series of choices and decisions they have made, starting, of course, with learning.
And yes, it is true, as we have discussed before, that some people are born with certain advantages over us, and the only way we can narrow that gap is by preparing ourselves better and working harder than everyone else, and so on.
First and foremost, you need to know certain rules of the money game.
To begin with, if you are someone with money problems, or you would like to have more money, don’t criticise entrepreneurs or rich people simply because they have no financial problems or because they want to keep growing their fortune (as long as they do it honestly).
The truth is that most people wouldn’t turn down a couple of million euros if you put them in their hands. So that kind of criticism is usually the result of envy. And envious people rarely get far, because, as we have said before, “the envious person doesn’t really want what you have; they want you to lose what you have”.
Instead of turning to the national sport of envying and criticising, learn from the people who have achieved what you would like to achieve, so that you can try to “copy” their moves.
The money game
Think of those games where, at the start, you choose the weapons you are going to use, the level you want to begin at and the path you are going to take. As the game goes on, you also have to choose between using certain rewards now or saving them up for later.
Finances work in exactly the same way. After the first decision, which is to learn everything you need to know about money in order to play, we then have to choose the talents and knowledge we want to develop.
We will have to choose between instant gratification and short-term “sacrifice” in exchange for bigger “rewards” later on.
Most people opt for instant pleasure and short-term fun, and are not willing to make sacrifices. Later on, many of these people live in constant sacrifice, while those who chose the other path reap, over time, the rewards of their past sacrifices.
The psychology inside the money game
Most of the factors that stop us from earning more money or achieving financial freedom have more to do with psychology than with money itself.
It starts with fear of risk, or loss aversion, which makes us unwilling to leave an apparent comfort that, over time, turns into a very uncomfortable place. It continues with our own insecurities, which make us want to appear to be what we are not, spending money we can’t afford in an attempt to “fool” everyone else. Keeping up appearances costs money, and it often makes us even poorer.
Other people don’t value themselves enough and think they would never be capable of achieving great things in life, and clearly their own thinking is their worst enemy.
Learning
A football fan watches matches and goes to the stadium to see their team, simply for entertainment. A football coach also enjoys watching matches, but draws lessons from them that help him improve in his profession.
This example applies to the books we read and the audiovisual content we choose to watch. We should try to make our “entertainment” useful for our growth.
When we want to learn to speak in public or become better salespeople, what we do is consume more content of that kind and put it into practice as soon as possible. Well, money has its own language, and whatever your profession or activity, you need to learn as much as you can about money; otherwise, you could lose all your savings in one bad financial decision by trusting the advice of the wrong person.
In the 4 pillars of wealth creation we had:
- The money you earn
- The money you save
- The interest you get on your money
- Time
As we explained in our 11 rules of personal finance, earning more money doesn’t guarantee you more wealth than earning less if, in the end, you spend more and save less, or make worse investments. Nor does it if you take on high-interest debt.
These are the rules of a game that many people don’t master, because this game isn’t taught in schools.
You have to be proactive about this. When it comes to money, you shouldn’t be a piece on the board, but the chess player who moves the pieces. Most fortunes have been made by building businesses and investing. Most people are apathetic towards these ways of making money: in some cases because of a lack of ambition, in others because of comfort, and in many cases because of risk aversion.
When many people decide to improve their personal finances, they turn to the usual “spend less and save more”. And yes, that can be a good start, but when you want to learn to master this game, you will find that this isn’t the right mindset, because one of the differences between the poor and the rich is that the poor focus on saving more and spending less, while the rich focus on earning more money.
Remember that you have two options: criticise the person who has a lot of money, or learn how they did it and follow similar steps. With the second option, you will need to learn certain rules to master the game and spend part of your time reading some books on financial education, the stock market and so on.
In short, it is like any other game. Before you play, you need to know the rules and learn how to play. The rest we learn by playing. The problem here is that whether you like this game or not, you are going to have to play it. So we have no choice but to learn.
Featured image: U.S. National Archives, Public domain, via Wikimedia Commons.
