What does financial wealth mean to you? From the moment we learn to count, experiences start to form our image of wealth. Myths take shape, holding us back from the financial freedom we deserve.
It happens to everyone. We have worked with quite a few doctors, dentists and entrepreneurs trapped by the misconception that the level of wealth they desire is unattainable without major risk and sacrifice.
One thing is certain, there are different paths you can take to reach your financial goals. The first step is addressing the psychological roadblocks by busting the myths.
Myth 1: You Have to be Rich to get Richer
Since the age of the internet, building wealth has taken on a new dynamic. The myth that you need to be born into money or attend an Ivy League school is a thing of the past.
The Reality: Millionaires are made every day and quite a few started with nothing more than a vision, passion and a strong team. Although some medical professionals start their careers with a mountain of debt, this does not have to hold them back from a future of financial prosperity. All they need is to have a proper financial plan in place and follow it.
The wealthy understand that there is nothing more important than investing in yourself. They also understand it doesn’t matter how much you make, but rather what you do with it.
Myth 2: I Don’t Have Enough Money to Save and Invest
Many people think you have to make a certain amount of income to start saving and investing. This roadblock could set you back years in building the wealth and financial freedom you want.
The Reality: The key to building wealth is investing early and taking advantage of compounded returns. No matter how much you save and invest, the earlier you start, the better. You can start small, even with just a few hundred dollars. But, what truly helps you get ahead is spending less than you make and saving at least 10-20% of your income. As long as you stay consistent in saving and investing, your wealth will grow exponentially.
Myth 3: You Must Sacrifice Family to Build Wealth
The baby boomers believed you had to choose between a career and a family, which led to the highest divorce rates in recorded history. However, their children have learned the value of balance, and the real truth behind wealth. This generation is responsible for a shift in mindset; “Work Smart – Not Hard”.
The Reality: By valuing productivity over busywork, successful people strive to be paid based on results, not time. Instilling the right business model from the beginning is key. Then, effectively investing and reinvesting profits is what sets the wealthy apart from those spinning their wheels.
Myth 5: A Savings Account is the Best Place for My Savings
Staying liquid and having access to some of your money is part of any financial plan. But how you do it is key. A savings account is the easiest and most manageable method out there. But is the best one?
The Reality: With low interest rates delivering less than 1% on your savings and inflation rates rising to over 2%, you are actually losing money in your savings account daily. Putting your money in something like TIPS (Short Term Inflation Protected Bond ETFS), gives you liquidity and the potential to earn more then inflation.
Myth 6: You Need To Take Big Risks to Build Big Wealth
Many new investors are taken by the unicorn IPOs and stocks multiplying over-night. What they fail to admire with the same clout are the quieter and safer investments in their portfolio building wealth in the background.
The Reality: You need to understand risk and manage it, not avoid it. Being cautious doesn’t mean you can’t build wealth; weighing the risk and rewards for each investment provides the confidence you need to invest. It might seem impossible to build wealth on 5-10% annual returns but slow and steady is what wins the race. Don’t discredit low-cost index funds – they can be quite lucrative. Working with an experienced and trusted financial advisor will help you make educated decisions and take the risks that are right for you.