The following post is by ESI from ESI Money, a blog about achieving financial independence through earning, saving, and investing (ESI). It’s written by an early-50’s retiree who achieved financial independence, shares what’s worked for him, and details how others can implement those successes in their lives. You can learn more about ESI Money here and get his free ebook, Three Steps to Financial Independence.
Let’s get the headline out of the way.
The good news: Becoming wealthy is simple.
The bad news: Becoming wealthy is not easy.
There, that clears things up, right? 😉
Becoming Wealthy is Simple
The dictionary defines “simple” as “easy to understand, deal with, use” and “not complicated.”
Many Americans believe that there is some great secret to becoming wealthy. They think it requires a combination of luck, vast knowledge, and a trick or two that only a few can pull off. However, the truth is that the simple “basics” are all you need to build wealth. This is why becoming wealthy is simple.
The fact that you can become wealthy by following a few, simple principles is the basis of both my personal financial independence as well as the topic of my site. Simply work on earning, saving, and investing over time and anyone can become wealthy.
As simple as it gets. At least to understand.
Becoming Wealthy is Not Easy
That said, the reason so many people fail is that simple does not mean easy.
The dictionary defines “easy” as “not hard or difficult; requiring no great labor or effort” and “free from pain, discomfort, worry, or care.” Unfortunately, this does not describe wealth-building. Implementing even the simple tasks takes a few, vital characteristics that most Americans find difficult to put into action. Many would even call those actions painful.
And even those who can commit to doing what’s necessary and enduring the pain often can’t maintain both over the long term. Thus their net worths are doomed to languish.
Key Characteristics
Building wealth isn’t easy because it requires discipline, patience, and persistence. Most Americans aren’t known for these qualities when it comes to managing their money.
Discipline requires that a person shows a measure of self-control as he spends. He prioritizes his spending and purchases only those things that fall within his budget. Discipline is also required when paying down debt and saving money. Instead of using resources for only fun and entertainment, he needs to exercise self-denial and discipline to get rid of debt and build savings. Very few people are willing to make the sacrifices to live like no one else in order to grow their wealth.
Even earning money requires discipline. Growing your income means that sometimes you have to get up early and stay up late. Occasionally, you have to complete tasks you find unpleasant. Even knowledge and skills are acquired only after you exercise the discipline to study and practice.
Dr. Thomas Stanley notes that most of the millionaires he’s studied have become wealthy through discipline. He notes that “Nearly all [95%] of the top 1% of wealth holders in America reported that ‘being well disciplined was very important/important’ in explaining their socioeconomic success.”
Patience is a rare trait in today’s world. We are bombarded with messages of instant gratification and entitlement. You deserve that expensive car now. You can put your vacation on a credit card – no need to wait until you save up the money. A 60-inch television can come home with you immediately if you qualify for in-store financing. The inability to wait to save the money for the things we want leads to debt and financial insecurity.
Another difficulty is that few have the patience to wait for results. Your business ventures won’t yield results overnight. A good emergency fund takes months, or even years, to build. Dollar-cost averaging in your investment portfolio requires the patience of decades.
Persistence consists mainly of the ability to keep up your wealth-building efforts. It’s easy to give up when you don’t see instant results, or when you see your neighbors enjoying their over-leveraged lifestyles. However, in the long run, those neighbors are likely to have very little wealth, since most of the toys they enjoy now have been bought with debt. It’s hard to see that when everyone around you is having fun while you follow a more practical course.
Bottom Line
Even though the concepts behind building wealth are simple to understand, it takes hard work to put them into practice.
But if you follow the simple steps to building wealth with discipline, patience, and persistence, you will eventually achieve financial freedom.
Photo credit: JD Hancock cc
