The First Step in Building Wealth

"Patience is bitter, but its fruit is sweet." -Aristotle

5-minute read

• >Consumer Debt
• >Better Decisions
• >The Power To Invest
• >The Marshmallow Test and the value of delayed gratification

This week, I'm putting on my "financial coach" hat to encourage you to approach your finances in a new light perhaps. Many of our clients have these principles well nailed, but this might push you further into a more profitable direction...

There is no shortage of financial advice - online or from your second cousin, Karl. But not all advice (especially from Cousin Karl) is valid for everyone.

But for all the advice, a few guiding principles make things worthwhile -- and today we discuss one of those: delayed gratification and how it will earn you greater wealth. Now, I'm not guaranteeing you a lifetime of riches... If you can be patient, it will pay off in the end. Here's how you should begin... The rewards of delayed gratification are not just financial; they're also about hope and optimism for a better future.

Kick Debt to the Curb

Debt can be helpful for real estate investors when buying a house or a business. However, it often reduces cash flow. Consider ways to eliminate consumer debt. It takes a little extra effort, but ridding yourself of consumer debt is typically the first step toward wealth.

A new TV might be fun today, but what if you took that money you would spend and put it toward debt freedom? Scaling and refining your real estate-related income. Choosing this option ensures the TV will come someday ... and we guarantee it will be bigger and better when you're financially ready.

Thousands of Small Decisions. Not a Few Big Ones. Each decision, no matter how small, can have a significant impact on your financial health. It's about being mindful and attentive to your choices.

Decisions are where financially based delayed gratification is tough. And it feeds off the TV example.

Instead of saving 6-10% of your annual income, what would it look like to save 20%, 35% or even 50% of your income? Invested in real estate deals, the wealth after saving and investing for 10+ years?

You might wonder, "How is that fun for anyone now?" But it can be a lot more fun. Why? It means creativity can take place. Instead of going out to eat at a fancy restaurant, make dinner from home and eat somewhere scenic in town for a picnic (where there's nobody to tip). Instead of buying a new car, consider a reliable used one. Instead of a lavish vacation, plan a budget-friendly trip. These are just a few examples, among thousands, of how living below your means helps you save for the future.

The Power to Invest

If you are new to investing or are considering investing soon, I recommend a starter property to learn the ropes. Manage the expenses and maintain a steady cash flow.

Start there. Let's not worry about boiling the ocean just yet.

And if you don't know much about investing, that's OK! Learning is part of the delayed gratification piece as well. It takes time to research and converse with trusted sources. We are big fans of local Real Estate Investor's Associations (REIA) and BiggerPockets.com.

This piece of advice is not as "practical" per se, but it's still incredibly valuable for achieving the right state of mind to build wealth.

With every purchase you make from here on out, please play the tape forward in your mind and think about how that purchase will affect your life. Every little purchase (a smoothie) to the big ones (a week-long trip to Europe) will affect your financial health. Am I saying not to have a good time?

Quite the opposite.

I want you to have the best time in life (eventually :) ), while setting yourself up to help others and make a healthy financial impact on the world.

I went this long without mentioning the marshmallow test, but come on, people ... we're talking about two marshmallows or one. This refers to the 'Marshmallow Test For Grown Ups 2014' by the Harvard Business Review. Although the original 1960s research with children, followed over many years, found that delaying gratification was a precursor to higher achievement as an adult. In financial decision-making, this test serves as a metaphor for the benefits of delayed gratification. Waiting for the 'two marshmallows' (i.e., the larger, long-term reward) rather than immediately indulging in the 'one marshmallow' (i.e., the smaller, short-term reward) can lead to more tremendous financial success.

If you recommend any other methods to delay financial gratification, I would love to hear them from you and pass them on to others making strides in this area of life. It is worth it, one million times over.

BE THE ROAR, not the echo®

Warmly, Janet, the Tax Wizard