Most people today spend more than they earn and also have credit card debt that is spinning out of control.
As an entrepreneur, it’s especially easy for expenses to spin out of control and cause instability in your personal life. No matter what kind of business you own, and how much money you already earn, its always important to go back to the basic principals of building long term wealth.
Many times, the process doesn’t even involve as many difficult sacrifices as people might think. It can require some patience and a little planning, but with these five tips any person can find themselves on the road to building a strong foundation of wealth.
1. Save More
This tip should come as no surprise. If you want to have more, then you have to save more. The goal should always be to save 20% of the money you make every month. For some people, this simply is not possible, so shooting for 10% (or even less and than scaling up each month until hitting 10%-20%) is acceptable.
Remember to be conservative both in your small and large purchase decisions. The old idiom to not be penny-wise and pound-foolish is very important for business owners. It’s an easy tendency to look for the hardest bargain on paperclips and office supplies while recklessly spending larger amounts of bigger expenses before they are even necessary.
Wait 30 days to make a large purchase and this will give you the best clarity in your decision making.
2. Invest Right Now
Saving money is a great first step, but no one becomes wealthy from putting their money into a savings account. As soon as you set money aside for the month, invest as much of it as you can.
The sooner you start earning returns on your money, the faster you will build wealth. Invest in a variety of different assets, and create a diversified portfolio.
Also, never spend your investment principal.
3. Pay Off That Credit Card Debt, Now
Credit card debt means lots of credit card interest. Many times that interest is as high as 21%. Avoid the damage this high interest is likely doing and start paying off your credit card debt as fast as possible, and keep your charges to a minimum.
It can really add up over time.
4. Track Your Expenses… And Take Time To Review Them
Write down every expense down to the penny. Do this every day, and at the end of the month take the time to review it. You may be surprised to see how much you are spending on things like eating out or shopping.
For some, these expenses can add up to more than their ‘big items’ like utilities or mortgage payments. Look at areas you can cut and think about places where you are spending money wastefully.
A few simple cuts here and there can really go a long way.
5. Set a Monthly Goal, and Stick To It
At the beginning of every month, you want to set what is known as a “wealth goal” for how much money you want to have in your savings and investment portfolio at the end of the month. Write it down somewhere where you will see it and look at this goal every day. Put in the work, hustle and do what it takes to meet that goal.
At the end of the month, you will love the feeling of satisfaction you have over meeting your goals and will find that you are quickly building up a great deal of wealth.
These tips are changes that any entrepreneur can easily make to their lifestyle to start multiplying their wealth and running a more profitable business. But they don’t work unless you do the work, so start implementing now!
What Les Misérables Taught Me About Our Values
Who am I? The ultimate question many of us try to answer. When I think of values, I think of Victor Hugo’s 1862 book, “Les’ Miserables”. In Hugo’s book, Jean Valjean, is used as a protagonist to highlight the power in redemptive love and compassion. Valjean goes into prison for stealing a loaf of bread, entering as a simple and decent man. His time in jail seems to have an unrepairable effect, where he emerges from the chain gang as a tough, bitter criminal who hates society for what it has done to him. (more…)
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In today’s world, an overabundance of information and a large number of distractions is making it increasingly difficult to concentrate on performing the necessary tasks. In this article, I propose 7 simple methods that will train your ability to concentrate, while not taking you from your usual activities. (more…)
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It’s excruciating when we know what’s killing us but we can’t do anything about it because as you know, it is not easy to pull the brake on a high way. According to Napoleon Hill, “remember this always – the best (and one might say the only) way in which old habits may be removed is to form new habits to counteract and replace the undesirable ones”. (more…)
Why Do We Have An Unconscious Bias and How Can We Manage It?
When I hear someone using my name once in a while throughout the conversation we are having, I cannot stop myself thinking “this person must have read Dale Carnegie’s books or must have been influenced by someone who read them…” Have you just recalled a similar moment and it felt nice?
As Dale Carnegie famously said, “Remember that a person’s name is, to that person, the sweetest and the most important sound in any language”. Why did Dale Carnegie highlight the importance of an individual’s name to that person in his “How to Win Friends and Influence People” book published in 1936?
Each and every one of us wants to feel special and unique. I guess he recommends using the person’s name in the conversation because that is one of the easiest ways to grab that person’s attention so that we can enhance the chances of getting our point across. However, I am more interested in this from the other side; hearing our names directly addresses our individuality, our need or desire to feel special and unique.
Let’s park this one for now and we will come back.
Categorization is essential to our survival
There is countless scientific research telling us about how our brains recognize similarities and put things into categories, which has been crucial to our survival in evolution and still helps us with a lot of things from learning new things to coping with the continuous influx of massive amounts of information through our senses.
The continuous influx of information is mostly handled by our subconscious mind rather than conscious. It is estimated that our brains receive about 11 million bits of information every second through our senses, of which only 40-50 bits can be processed by our conscious mind. We process more information than we are aware of. The magic here is the subconscious mind.
An example is when you are at a very loud party where you hear a lot of words flying around without you recognizing each one of them, then suddenly, you immediately catch it when you hear your name. Your subconscious had been processing all of those words, without your awareness, but informed your conscious mind when your name was out there because it was relevant to you.
In order to most effectively process this much information and inform the conscious mind with only the relevant ones, our subconscious employs categorization as one of its strategies.
When our ancestors encountered some deadly predators in the African savanna, their subconscious prompted their conscious mind to immediately fight or flight by categorizing the information gathered through their senses into “predator / life threat / take action”. Most probably we are not descendants of the ones that were frozen rather than fighting or flighting!
Although it is a completely different situation, the same strategy applied in remembering lists. Let’s look at the below two lists.
- lion, eagle, shark, leopard, hawk, whale, panther, falcon and dolphin
- lion, leopard, panther, eagle, hawk, falcon, shark, whale and dolphin
The second list is easy to remember because it is reordered into relevant groups even though the content of the both lists are identical.
Subconsciousness is the magic and categorization is one of its key strategies. It is essential to our survival, learning new skills and processing information as well as bringing back the information we had processed and stored.
This amazing skill has its drawbacks
As a result of our brains’ categorization strategy, we also categorize people, especially if we don’t know them as well as our closest ones.
Imagine I am sitting at the table next to yours while you are having your favorite coffee and working on your computer or reading your novel at your neighborhood coffee shop. I stand up, very calmly grab your bag, and start walking away. Your reaction might be quite different depending on my outfit. It could be much more vocal and harsh if I have a dirty T-Shirt and a pair of torn jeans on. However, if I have some navy colored, 3-piece suit and well-pressed white button up shirt on, you might even say something like “Excuse me, you might have picked up my bag by mistake”. (There is an experiment done by social psychologists which reported similar results)
Similarly, I would not be surprised to hear that my co-worker’s spouse is very skilled and knowledgeable in English grammar and literature because he is an English teacher. However, I would not expect it from my co-worker herself because she is an outstanding chemical engineer.
This is defined as unconscious bias or stereotyping, as a result of our subconscious brain’s categorization strategy. The outfit I have at the coffee shop impacts your response to my action, because it puts me into a different category in your mind depending on my outfit. My co-worker’s and her spouse’s backgrounds make me put them into different categories, which might mislead me sometimes.
Just like we categorize things, it is very natural that we categorize people.
The key question here for me is; how do we truly treat people as individuals so that they feel unique, just like as they would want, while we know that our brains categorize people?
We can overcome unconscious bias
Leonard Mlodinow, in his enlightening book “Subliminal”, suggests that “if we are aware of our bias and motivated to overcome it, we can.” That doesn’t mean that we need to fight our brain’s categorization strategy. We just need to employ our conscious mind more when we are working or dealing with individuals.
Our unconscious bias might tell us scientists are bunch of technical nerds who cannot understand abstract concepts that marketers are talking about or it might say that marketers are some daydreamers who need to be grounded by scientists to the real world all the time. I am an engineer and I love thinking in abstract terms and I worked with quite a lot of marketers who thought primarily in factual and concrete terms.
Spending some effort to learn more about individuals will help overcome unconscious bias. Gathering more information and qualities about them will make it easier for us to treat them as individuals rather than a member of the category we put them in our minds.
The moral of the story here is to recognize the fact that our brains do categorize, and it is essential; but also, to recognize that every individual wants to feel unique. When we appreciate these two and keep reminding them to ourselves, we are one step closer to figuring out our own way to overcome unconscious bias and treat people more like individuals.
What was the most interesting part of this article for you? Share your thoughts below!
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