Do you want to know how to become wealthy? Who doesn’t? I’ve done a little searching recently for just how to become wealthy. The results surprised even me. Some of the results I found were along the lines of live within your means, save and invest, etc. Basically all of the typical stuff you already know and hear. But one thing I learned but rarely ever hear about is the ultimate key to becoming wealthy: changing your viewpoint.
What Does Changing Your Viewpoint Mean?
What exactly do I mean by changing your viewpoint? I simply mean to stop looking for short-term solutions or answers and start looking at long-term solutions or answers. Here are two examples to help further explain this:
When many people go shopping for a car they focus on one thing and one thing only: the monthly payment. They look at their monthly budget and see that they can afford to spend $325 each month on a car. When they go to the car dealership, they tell the salesman they can afford $325. The salesman grins from ear to ear and sells them a car they really can’t afford, but gets the monthly payment to $325 so they think they can afford it. Meanwhile the salesman is giving himself a big fat commission.
Another example of short-term sightedness is when out shopping, you see a sale for sweaters, buy one get one 50% off. Many people (including me in the past) would buy at least two sweaters since I am getting a great deal on two sweaters. After all, who passes up a deal to get something at half price?
In both of these examples, the consumer is using short-term thinking when making a buying decision. The people that think this way will have a very difficult time at amassing large amounts wealth in their lifetime. This is because they don’t look at the long-term, or overall cost of the things they buy.
In the example of buying a car, the smart consumer will look at the overall cost of the car – interest, maintenance, insurance, gas, etc. to determine if they can afford the car. The monthly payment doesn’t factor into the equation until the end.
For the sweater example, most times we only need one sweater, not two. But we think we are better off buying two since we are getting a deal even though buying that second sweater is increasing your spending. By thinking long-term, and asking yourself if you really need two new sweaters, you can overcome this.
One final example of this is one I was guilty of in the past. When I bought my first house, I went shopping for all of the things I didn’t realize I needed, like a rug and shower mat in my bathroom. I bought the cheapest ones I could find at Walmart. After about 4 months when I pulled them out of the washer, the rubber backing had completely fallen apart. I ended up having to buy new ones.
This time though, I bought more expensive, higher quality ones that have lasted me for over 5 years now. I fell victim of short-term thinking by only focusing on the price, not the long-term durability of the product.
So How Do You Change Your Thinking?
The key to making smarter decisions is to take a moment to stop and think before you buy something. Ask yourself what the smartest move here is to make. When I go shopping, I make it a point to ask myself how this purchase will affect my finances in a few years time. Is this purchase making more sense in the moment or over the long-term?
Many times this pausing is enough to help me to make the right decision. Other times though, even after asking myself the question, I have no idea. In fact, I have conflicting answers. On one hand, the purchase does not make sense for me, but on the other hand, it does. In these situations, I do nothing. I go home and think it over some more.
One of two things will happen when I do this. Either I will completely forget about the item I was thinking of buying, which means I made the smart move by not buying it a the time, or I will be able to better sort out my reasoning and make the right choice.
If you want to become wealthy, you need to start thinking long-term. You won’t be wealthy if you give in to short-term gratification all of the time. You need to delay gratification and focus more on the overall costs of things. When you can make this switch in your thinking, you will find that you will begin to accumulate wealth quickly.