Cut costs: There are a lot of financial planners and gurus out there who tell you to do one thing. They say if you do this one thing you can retire rich and you know what, they’re dead wrong.
So today we’re going to talk about this one thing, why it’s really bad financial advice, and what to do instead. Let’s get started.
Cut Costs: Bad Financial Advice
So, what is the one thing that most financial planners and gurus are telling you that I think is really bad financial advice? Here’s what it is.
They tell you to have a budget, focus on your expense and to cut costs. Don’t spend too much money at Starbucks, save some money and make sure that you’re living below your means.
Here’s why I believe that this is really bad advice.
Now, don’t get me wrong, living below your means and not getting into consumer debt is good advice.
But here is why having a budget and trying to save a few dollars is bad advice.
You can’t save your way to financial freedom and I will prove it to you.
I’m actually doing it right now. Now, there’s a website called www.dinkytown.net. On this website you’ll see that there’s a bunch of financial calculators.
They’re all free, including a compound savings calculator.
Let’s take a look at this calculator
So let’s say that you already have $10,000 saved. Maybe it’s more maybe it’s less, not that important. And let’s also say that you want to save money over the next 20 years.
If you’re in your 40s and say, “Hey, I want to retire at 65.” Which I believe is way too late. Why retire at 65? I believe everybody should retire at 55, this way you can still enjoy life.
Anyhow, let’s say that you’re saving for the next 20 years, and the rate of return, the interest that you’re getting on your savings, is 4 percent.
Now I know 4% sounds generous, especially if you look at the markets right now we’re getting 1%, 1 and a quarter on a lucky day.
Now let’s talk about the monthly contributions
This is where I want to show you that financial advisers who tell you, “Just stop drinking your latte every day. This is how you can retire rich,” are dead wrong.
How much is a latte or whatever beverage you get at Starbucks? $5? So let’s say you’re saving $5 a day, that’s $150 per month.
So if you start with $10,000 right now, and save your latte every day, you’ll save $150 a month.
After 20 years you’ll have what?
$76,000. $76,000? That’s nothing.
Now let’s say that the financial planner says, “Well, you have to save some more money. You have to find a way to save $500 a month.”
So you’re cutting expenses. You’re not going out with friends, you’re not taking your family to dinner and you’re saving $500 per month. Let’s see what happens.
If you’re saving $500 per month and you do it for 20 years, not going out for dinners, not having fun with friends, not having a coffee, flying economy, blah blah blah, right? You get the idea.
Then you would have $200,000 after 20 years.
Can you retire on $200,000?
Of course not!
Well this is where now your financial adviser will say, “Well, apparently, you have to save some more money.”
How do you do this? I mean you tell me. Is it easy for you to save $500, $600, $700, $800 a month? Let’s just say you’re saving $1,000 per month, somehow magically you cut your budget.
You’re not doing anything for fun anymore, you’re driving an old car and living in a trailer park home. I’m exaggerating, but you get the idea, right? Then you’d have $386,000 after 20 years.
So obviously, this is not working at all. Let me ask you this, is this making sense so far? Do you now see why you can’t save your way to financial freedom?
Let’s talk about what to do instead.
If saving your way to financial freedom is not a viable way, how do you do this? Instead of focusing on cutting your expenses, focus on finding a way to make more money.
How do you do this? Now you might say, “Wow Markus, easier said than done.” Right? I mean, simply make more money. How do you do this?
Well, there’s one thing that will help you to make more money. One thing.
It’s your skills. It’s what you know.
Because think about it, if you have better skills than somebody else, you advance in your job.
Here’s what I believe the most important skill for you to have is
It’s how to make money while you sleep. You can do this through trading or investing in real estate. You need to have this skill to make more money not based on how much you work, but based on the money that you invest.
There was a dude called Malcolm Gladwell and he wrote a book it’s called “Outliers.” In this book he suggested, that it takes 10,000 hours before you master a skill.
10,000 hours? Are you kidding me? I think this is way too much.
So what’s the shortcut?
You simply ask somebody who has done it, right?
If you want to become a millionaire, ask a millionaire, “What have you done?” If you want to make money in stocks, ask somebody who has been making a lot of money in stocks, “What do you do?”
And the best thing I believe to do is get a mentor.
You will see that the rich people will gladly share how they make their money. Rich people don’t have a scarcity mindset.
You see, poor people always think, “Okay, I shouldn’t tell anybody what I’m doing to make some money.” Rich people they tell you all the time, “Hey, here’s what I’m doing and here’s why.”
They have an abounded mindset, right? If everybody would be a millionaire I do believe that the world would be a better place because I also believe that the lack of money is causing a lot of problems.
You see I’m sharing this so you know what I’m doing.
A key concept is what you focus on expands
Financial advisers and gurus want you to focus on your expenses. So what happens when you focus on your expenses? When you focus on it, it expands.
What I want you to focus on is making more money. How? By acquiring a money making skill.
And how do you acquire a money-making skill in the fastest and safest way possible? Ask somebody who has done it.
And not the financial advisors, because think about it, are financial advisors millionaires? You should ask them, maybe they are, maybe they aren’t, right?
You know what they say, “Show, don’t tell.”
This is why I believe that to cut costs, or keeping a budget is bad financial advice. Do you agree? Is this making sense? And I know that this is controversial but, hey, this is my opinion and I stand by this.
I personally don’t have a budget. Why? Because I have enough money coming in, and I want the same for you.
This is what I want you to focus on: making more money instead of saving a dollar or five dollars by not going to Starbucks today.
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