Money problems aren’t money problems — they are habit problems.
You’ll eventually run into money problems if you consistently spend your monthly income without saving anything, fall for consumer culture and lifestyle inflation, and if you don’t spend any time and effort learning high-income skills.
In other words, your habits determine your financial health. Fix your habits, and you’ll fix your finances. Changing your life starts with changing your behavior.
Disclaimer: This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any significant financial decisions.
Learn High-Income Skills
The more you learn, the more you can earn. This is because the more skills you’ve mastered, the more valuable you become. The more value you can deliver to your customers or organization, the more you’ll be compensated.
If you’re easily replaceable in the marketplace, it means you haven’t developed enough high-value skills. And those who are easily replaceable will, therefore, make an average (or below average) income.
Learn rare skills. Learn skills that are valuable to society. Learn skills that get paid well. This will increase your earning potential like nothing else. Examples of high-income skills are:
- Content creation
- Building sales funnels
- Social media marketing
- Financial management
- SEO marketing
- Video production
All of the skills mentioned above can be learned in your spare time by reading books, following courses, or even through free content on Medium or YouTube.
We live in an age where information is available online, at our fingertips, for free. The only thing stopping you from improving your skills is you.
Start mastering high-income skills, and your earnings potential will fundamentally change.
Pay Yourself First
One of the most effective financial habits you should develop is paying yourself first. You see, the first thing most people do when they receive their paycheck is spend it. They pay other people first.
Paying other people first (aka, the companies you buy stuff from) is a formula for going broke. It shows you prioritize stuff, designer clothing, and fancy gadgets more than your freedom and financial security.
Paying yourself first means that the first transaction you make when you receive your paycheck is with yourself. For me, the first transactions after receiving my monthly income are:
- Put a fixed amount towards my emergency fund
- Put at least 15% towards my savings account
- Put at least 15% towards my investment account
Instead of paying other people first, I pay myself first. This one habit has helped me save and invest thousands of dollars that would’ve otherwise been wasted on stuff.
“Do not save what is left after spending, but spend what is left after saving.” — Warren Buffett
Paying yourself first requires self-discipline, but that’s the price of living a financially stable life. Once you’ve paid yourself, you are free to spend however you like.
The most important thing is that instead of squandering it all, a part of the money you worked so hard for is protected. You’ve put it away for your future self, a potential economic downturn, and your financial freedom.
To ensure you pay yourself first each month, I recommend setting a recurring reminder in your calendar when you receive your paycheck called ‘pay myself first’.
On top of that, pre-determine how much you’ll put towards your emergency fund, savings, and investment account each month. Make sure you know these numbers before you receive your next paycheck.
Get Things Done
The more productive you are, the more you can get done. The more you can get done, the more money you can make. It’s those who consistently get things done who tend to get paid the most.
You see, most people talk about starting a side-hustle, building a product, writing a book, creating an online course, or starting any other money-making endeavor — only to never do it. All they do is procrastinate, and procrastinators don’t tend to make a lot of money.
It’s those people who can quickly go from idea to execution, and from execution to completion, that make things happen in this world. Build the habit of getting things done, and money will follow.
Here are a few tips to become more productive:
Break the cycle by…
Consumer culture has trained us to think we need more stuff, better stuff, and fancier stuff in order to be happy. It’s not true.
Studies have shown that the happiness from buying ‘stuff’ tends to last just a few days, whereas the happiness from experiences (eg. traveling) and time-freedom last months, years, or even a lifetime.
But, the more money you waste on acquiring stuff, the less money you’ll have available to put towards life experiences and time freedom.
Consumer culture keeps you trapped in an endless cycle of spending your hard-earned money on things you don’t really need, promising to make you happy, elevate your status, or remove your insecurities.
It’s a smokescreen. It’s tricky.
All it does is force you to work harder and keep you further away from financial freedom.
To break this cycle, you need to understand that stuff won’t make you happy, it won’t magically fix your insecurities, and it will only raise your status in the eyes of people who don’t really care about us anyway.
“We spend money that we do not have, on things we do not need, to impress people who do not care.” ― Will Smith
…Practicing Your Version of Minimalism
To break the cycle of endless consumption, I recommend practicing your version of minimalism. You don’t have to sell all your stuff, live in an empty house, and wear the same clothing all day — just practice your version of minimalism.
This could mean you no longer get the latest iPhone each year because of what you think it does to your social status.
You only purchase new clothes when you truly need them, not out of emotion or impulsiveness.
You resist getting a more expensive car once you start making more money, and put it towards financial assets instead.
You ask yourself more often what the long-term value of a potential new purchase will be, instead of mindlessly buying something.
Once you break the chains of consumer culture, your path towards financial freedom will be so much smoother.
The less you spend on stuff, the more money you have to invest in financial assets that generate more money — helping you get closer and closer towards a life of freedom.
The one thing the wealthy all have in common is that they make their money work for them. This means that no matter if they’re sleeping, traveling, or literally doing anything else, their money is generating more money.
This is true freedom.
The rich understand that, although you can save your way to financial security, you can’t save your way to financial freedom.
To reach financial freedom, you need to invest in assets that make you money while you sleep. Each dollar invested is a little employee working towards your freedom.
“If you don’t find a way to make money while you sleep, you will work until you die.” — Warren Buffett
For example, investing in real estate pays you rental income. Investing in stocks, ETFs, and index funds pays you dividends and long-term profit in the form of higher stock prices.
If all you did was save, your money would slowly lose purchasing power due to inflation — making it worth much less than it used to. As a result, your hard-earned dollars can now buy you less than when you earned them.
Investing, on the other hand, is the only hedge against inflation.
If you’re just starting with investing, don’t bother picking individual stocks. Especially for beginners, that’s a quick way to lose money. Instead, start by researching index funds and ETFs that track a broad index like the S&P500.