(03) 9020 2905Inertia is an incredibly powerful force. It’s a rule of physics that says that things will generally stay in the state they are.
Fat people will remain fat. Stupid people will maintain low IQs. Lazy people will create body-shaped grooves in their couches. Star Trekkers will never have any “normal” friends.
And poor people will remain poor.
Unless something changes.
Each one of those – being fat, penniless, stupid, lazy or a friendless geek space cadet – is actually an “inertia mindset”. It’s almost always a choice. Brains need rewiring.
A behaviour needs to change. Actually, probably a whole load of them. But, according to behavioural specialists, changing behaviours ain’t easy.
If one of those traits is what really annoys you about yourself – and I’ve had to overcome a few myself – then you know that every day when you wake up, you have the power to change.
How many people does it take to change your lightbulb? Um, one.
As I’m no Michelle Bridges or Stephen Hawking – I’m more Homer Simpson and Captain Kirk – I’ll stick to what I am qualified to deal with.
And that’s what will keep most people forever poor. Here are the ten mindsets you most need to change.
Spending more than you earn: Seriously, this is as fundamental as knowing that cleaning your teeth will help stop you looking like a Collingwood supporter. It doesn’t matter what your income is, if you spend more than that, you’re going into debt. And eventually out backwards.
Your wheels. Cars are wealth vacuums. More money is hoovered on cars than on any other asset. Spend $30,000 “upgrading” to a second hand car instead of a $50,000 new car and you’ll save yourself $10,000 a year.
Renting beats buying. “I’ll make more money renting and investing the difference.” Bollocks. Even if you did invest the rest, which you won’t, because no-one does, you’re unlikely to beat the rates of return on home ownership. Ever. End of argument.
Credit cards aren’t evil. Yes, they are. Unless you use them for points only. If you don’t pay off your credit card in full each month, you’re paying for other people’s Frequent Flyer holidays. (Thankyou!)
The stock market is gambling. Codswallop. Shares deliver real returns in excess of inflation. Sure, they have their ups and downs. Long-term, it’s a winner. This is where most people make real money, unless they build their own small business into something.
Not investing, ever. If you’re not CONSTANTLY investing, somewhere, that’s going to create income or equity for you, what are you intending to live on later in life?
The age pension will save me. No, it won’t. It will probably exist. But it will leave you as miserable as it does pensioners now.
Playing lotto. Everyone wants the dream $10 million prize pool. You won’t win it. But you will spend countless thousands trying to. Put the money towards a real investment strategy.
Ignoring your super. For most, the real difference between the age pension and a reasonable retirement will be a big super income stream. Sure, super’s rules are changing all the time. Freaking annoying, I know. But it’s still the most tax effective way to save for your retirement.
Buying from spruikers. Usually property. And usually from property arms that are related to the spruiker, or from which they receive huge kickbacks. They’re usually selling stuff that they wouldn’t sell to their parents. But they make buying it so easy! Avoid like the plague.
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Sometimes you get to have conversations, with people who want to change behaviours, that you’ll never forget.
I got two of those calls earlier this year, from guys who were fairly dissimilar.
One was a WA fly-in, fly-out (FIFO), mining worker, earning very good coin. The other was a Sydney lawyer, who earned, roughly, double.
Both of them said the same thing. “I’m earning good money. But I build up $20,000 in my bank account and I blow it. Help me.”
They even blew it on the same things! Overseas holidays, restaurant meals, general party-time. Too much money in the account. Blow it fast.
They wanted help. They reached out. Investment plan detailed. Spending curbed. Problem solved.
Today I’m going to buy a treadmill. But I need help. Anyone know Michelle Bridge’s phone number?
Bruce Brammall is the author of Debt Man Walking (www.debtman.com.au), a licensed financial adviser and mortgage broker. bruce@debtman.com.au.