I can’t afford it! How many times have you heard your parents say things like this when you were a kid? How many times do you find yourself uttering those words now that you’re an adult, with maybe kids of your own?
Poverty and prosperity are two sides of the same coin. It takes no more effort to be prosperous than it does to be in poverty. The difference is in our mindsets.
The wealthy ask themselves, “How can I make the money to afford this? What can I do?” Then they go about finding the ways and putting their ideas into action.
Note: This article is part of the money myth series, where we take a good look at some of the most common money myths and how they may be impacting your relationship with money.
I Can’t Afford It? First, Create Assets
Some people even set fun goals prior to making a purchase on a high-priced item. They create assets which pay for what they want. This also offsets a new liability they’re soon bringing into the financial picture. Let’s say they want a $25,000 car. The payment every month works out to be $433 every month if the loan is for 60 months and the interest rate is at 1.49% APR, with no money down.
So, they turn buying a car into a fun game of creating new assets which can create that $433 every month. Of course, it may be in the form of long-term stock or real estate investments. This means the assets they just created cannot actually be used to pay for the car loan. Still, it’s a great feeling to know that there’s assets that have already covered the cost of the car loan. Those assets continue to create money, even after the car loan is paid off.
Astute readers will notice at this point that for the assets to pay the $25,000 car, you’ll basically need this much in investments. That’s spending twice the car! You are right. Robert Kiyosaki, author and owner of the Rich Dad, Poor Dad book and brand, says he buys a golf course to pay for his Rolls Royce.
Of course, not everyone is a Robert Kiyosaki or has enough money laying around to go out and buy a golf course to help offset all the liability of a new car purchase (and then some.)
So create game variations. Invest $10,000 for 20 years. With a 6% return rate, after 20 years this amount will be $32 K. Invest $5,000 for 10 years. With the same 6% return rate, this will be $9 K.
If you’re like most people, life gets busy and you let things fall by the wayside, like an accumulation of funds in your checking account. That money just sitting there is being lost to inflation. The idea is to continually invest. Financial freedom, like most other things worth doing, is a marathon. It’s not a one-time deal. Gamification reminds you to always create assets.
If you own a business, then create a new product and launch it. This is a good a time as any to create something great for your customers. Likewise, you can raise the prices of current products to help pay for the car.
Or write that book you’ve been meaning to write and put it out there. It won’t pay for the car by any stretch of the imagination. What writing the book will do is satisfy that itch you’ve had for a long time. Congratulations! You crossed an item off your bucket list!
Use Debt to Your Advantage
Some car buyers cringe at the thought of taking a car loan to buy a car, especially if they have the money upfront to pay for the entire car. Certainly, this is great tactic. Not only do you avoid the interest payments on a car loan, but the extra premium the auto insurance company makes you buy for as long as you have a loan.
Still, debt can be used as a tool. It removes the “I can’t afford it” excuse. Before you consider paying for the car in full, ask yourself if the extra money you’re pouring into the car loan is an opportunity cost. This means it could cost you the opportunity of putting that money into assets that create money. For example, how much better off would you be, investing the money that would have gone towards paying 100% of the car? Would it eventually cover the interest payments? More importantly, what happens after the life of the loan is over?
That asset will continue to create money! Now you can say “bye bye” to the phrase, “I can’t afford it that car” forever.
The idea here is to remind yourself that financial freedom isn’t a one-time deal. By turning this whole process into a fun game, you’re constantly thinking about finances, namely how to get more freedom dollars. That’s what money really represents. It buys us time. Money enables us to live in comfort. It lets us quit our jobs if our managers are being unreasonable. It affords us the opportunity to take time-outs and take care of loved ones when emergencies happen. Or for us to take time off and think about what really matters to us, like writing that book we’ve been meaning to write for the past decade.
Remember that goals aren’t about getting stuff. They are about growing.
Do You Still Think “I Can’t Afford It”?
You Can More Than Afford It!
The Pandemic is proof of our need to always look out on the horizon and think about our financial futures. When the shelter-in-place started, millions of people lost their jobs. My financial advisor’s suggestion of having just 3 months in emergency savings became crap advice. Nowadays, I have at least a year’s worth of emergency funds in a high-yield savings account.
Emerging out of the Pandemic, the cost of everything has gone up. While most economic experts think this inflation is a transitory phase, how much better would you feel knowing that you’ve continually taken steps to earn, save, and invest?
For example, everyone wants that magical $1 million retirement fund. Did you know that this really equates to just $50,000 a year for approximately the next 25 years in retirement? Decades from now, it is likely that will be the new poverty level.
Do you really want to spend the next 30 or 40 years living in poverty? This is one of my biggest issues with FIRE (financial independence, retire early). The people implementing this are proud of the fact they can retire at the age of 35 or 40 with a million dollars in investments. Again, what happens after 30 or 40 years in retirement? At some point, they will have to go back to work, unless they have the foresight to build that portfolio, even in retirement.
How great would it be to head off the effects of inflation or whatever strange events may happen in retirement by shooting for the stars and hitting the moon? By putting in more than you need, you might be surprised to find yourself sitting on a $100,000 a year retirement fund.
Most people complain about not having enough money. How many ever complain about having too much money?
Changing Your Money Myths
The stories you can been telling yourself about money is just that: Stories. In many cases, these money myths have had a bearing on your relationship with money, pushing you away from having more in your life. The way to more wealth is to first get to work changing how you think about things. Money, after all, is just a thing with no extrinsic value. When you take away the numbers printed on money, it is not worth the money it’s printed on.
Money is just an idea, like the myths you have around money. When you change how you think about money, you start attracting more of the things you want.