In the previous articles, we covered four concepts that millionaires have learned during their journeys that average people should also learn. Now we will cover the last two concepts in this millionaire mind trainer series.
5. The Relentless Conversion of Your Earned Wages into Investments
You can’t reach your financial goals or create prosperity by simply saving money alone. You must learn how to invest. Investing is the difference between having a modest nest egg and creating over one million dollars in net worth. For example, our family managed to save approximately $333K over our working years—a nice nest egg, but certainly not anywhere near the results we were looking for. So, in addition to saving that money, we also invested those funds. Over a period of less than 25 years, we managed to turn our investments into over one million dollars.
Of course, when we started our journey, we didn’t understand this concept very well. We only knew that we wanted to grow our money, and we did pretty well. Now that we possess millionaire minds, however, we understand our efforts were weak. We could have easily done so much better.
This is an extremely important concept because it involves a break with the standard behavior of American consumers. The standard consumer behavior is to become trapped in a cycle of working hard and then spending money to relieve the stress caused by working hard. This leaves over half of all Americans with little or no financial resources.
Our goal is to engage in the exact opposite of the behavior described above in a directed and focused effort of relentlessly converting our weekly working wages into investment assets.
Train your mind to constantly seek the conversion of your weekly wages into investments.
We will train our minds to constantly seek this outcome by learning and then practicing two important concepts.
Delayed gratification: If you spend your money now on consumer items, you will never be able to afford the next-level experiences that you really want. You will always be in debt and just scraping by. If you put your consumerism on hold, however, you can accumulate wealth and afford some pretty amazing things. For example, adhering to this strategy, you might easily be able to afford a beach house or something else really valuable that may actually give you a return on your investment.
Opportunity cost: The concept of opportunity cost says that if you invest your money in one option, you automatically lose the opportunity and benefits of using funds for the next-best option, usually related to investments. For example, I can make $100 in profit on investment option 1, but I can only make $75 in profit in option 2. Picking option 2 will cost me $25 in profit, which is my opportunity cost because I choose the less-profitable investment
Opportunity costs can also apply to the consumer items we routinely purchase. For example, let’s say I want to buy a new car that costs $55K. Going to an online car loan calculator, I enter a $15,000 down payment on this purchase and plan to finance the remaining $40K. I soon learn that car loan interest is running around 6% annually. I look at a five-year loan at 6% with $15,000 down and financing $40,000. The total cost to me over those five years (including interest) for this loan will be $61,398.
Such a purchase would not only deprive me of this amount in my savings account but also the 6% income this money could create for me in my investment portfolio over this same time period. Even this, however, is not really the end of my opportunity costs. Depending on when I invested this money, the amount I invest could easily triple over an extended period of time—say 20 years. So, the actual opportunity cost is much more than the $61,398 quoted above. It could well be in the neighborhood of $183K when the longer view is taken.
6. Learn Investing Concepts
To invest more efficiently and increase your profits, you must learn mainstream investing concepts or investing best practices, even if you turn your investing over to an advisor. If you do not have an understanding of basic investing concepts, then an advisor could easily take advantage of your ignorance by buying investments that pay them a nice commission but perform poorly for you.
How to Train Your Brain to Learn and Use Investing Concepts
Start by reading the suggested materials listed below:
The Illustrated Guide to Financial Independence by Larry Faulkner
Faulkner and Michelle Bohls
Professional Success by Larry Faulkner
The books above cover the most important investing concepts the average person needs to know.
If you take the steps outlined in the Millionaire Mind Trainer Series, you will easily be ahead of 90% of the population in both knowledge and financial ability. Your journey to millionaire status will be much smoother than those who do not have this knowledge or training.
—Larry Faulkner
