Please use the menu below to navigate to any article section:
Most people want wealth, but few will do what is necessary to create it.
Why do people want certain things, but they never take action to achieve them?
What subconscious thought process causes a disconnect between desire and doing what is necessary to fulfill the desire?
The reality is almost anyone regularly employed, from ditch-digger to doctor, can achieve financial freedom with relatively minimal effort – but surprisingly, almost nobody will.
All you have to do is start living specific, proven financial habits early enough with sufficient consistency and the result will be financial freedom with almost total certainty.
Anyone can do it, yet studies prove fewer than five percent actually reach the goal.
It’s absolutely amazing.
Why do so few people succeed at creating wealth when so many desire it and it’s not that hard to do?
It makes no sense.
After all, financial freedom can have a powerfully positive impact on the quality of your life.
With wealth you can live your dreams unencumbered by the shackles of financial constraints.
You can eliminate money worries and stop spending so much of your lifetime working to earn it.
Instead, you can travel, play golf, relax, read or do whatever you most enjoy.
Wealth is a very alluring goal.
Yet, even though most people dream of financial freedom, the reality is very few will turn those dreams into reality by taking the necessary action.
This question has been one of the great mysteries of life for me.
It has ranked right up there with Black Holes, the Pyramids of Egypt, and “what is electricity”. (Frightening to know what financial coaches think about, isn’t it?)
The Problem Of Wealth Creation … Solved
The mystery of why people don’t take action to fulfill their dreams was finally put into perspective when I read a statement from heart surgeon Christian Bernard…
This doctor claimed to have no sympathy for people who lacked the will power or commitment to stop smoking.
While this seems, at first glance, like a heartless statement (pun intended), you should pay close attention because his observation is very important.
What he observed is that he never had a heart transplant patient who couldn’t stop smoking on the spot once they faced surgery.
This is a critical and very telling point!
Faced with a massive coronary, surgery, and possible death, people were suddenly able to give up smoking.
Tell them about the health benefits of not smoking and you get nothing.
Until the client looked death right in the eye they would just keep the habit up knowing full well that it was slowly killing them.
Dr. Bernard’s insights on smokers and surgery teach us several lessons about human behavior.
These lessons bring some much needed perspective to the question of why most people are so amazingly unsuccessful at creating wealth.
First Wealth Creating Principle
The first lesson we can learn from Dr. Bernard is that people are generally more motivated to avoid pain than seek pleasure.
In the smoking example, the patient would continue smoking because stopping was painful and continuing to smoke gave immediate pleasure.
The health impact was not as compelling to the smoker as the transient pleasure of the next cigarette and the immediate pain that would result from not smoking it.
Once the heart surgery became imminent then the health impact was undeniable, painful and very much in the patient’s face.
At this point the smoking would end because the dramatic pain of surgery and possible death greatly outweighed the lesser pain of quitting smoking or the transient pleasure of another cigarette.
People smoke because it gives them pleasure and quitting is painful.
They stop smoking only when forced by a more compelling pain … surgery.
That is very important to understand.
The exact same issue occurs in creating wealth.
I can lecture on the benefits of saving and investing until I am blue in the face and people still won’t do it.
It is a pleasure goal in the future that requires you to endure minor pains and inconveniences right now to achieve.
To get someone motivated enough to overcome lethargy, take risk, and confront the fear of change necessary to create wealth there would need to be an immediate and substantial pain greater than the alternative of doing nothing.
Unfortunately, not building wealth today won’t cause you any pain – at least not today.
There is no motivator like surgery to force you into action.
Because of that, few people pro-actively take action.
Let’s face it; the consumer lifestyle (which is antithetical to creating wealth) isn’t that bad on a day-to-day basis.
You pay your bills, drive an acceptable car, take a vacation, eat good food, and go out once in a while.
You’re life is full and so is your tummy.
Your pain threshold hasn’t been reached or you would do something to solve it.
The rule is simple: you will do what it takes to create wealth when the pain of your financial reality exceeds the price you will have to pay to do something about it.
You know you should save, invest, and learn about personal finance, but it’s ethereal and the consequences of putting it off are not immediately painful.
Like the smoker who slowly but surely inhales himself to poor health, the typical consumer slowly but surely spends himself into financial emphysema.
The reason is because wealth and financial security has no immediate call to action until it is too late.
In fact, not building wealth today gives you more time and money for other activities.
Where’s the pain to motivate you into action now?
It doesn’t exist until it is too late… and that is the problem.
Second Wealth Creating Principle
The second lesson we can learn from smokers about human nature is we are more interested in preserving our current comfort than maximizing our future comfort.
We prefer to have our transient pleasure now even if it implies substantially negative long-term consequences in the future.
For example, every long-term smoker alive is aware of the significant, negative health consequences of their actions.
Yet they go right on puffing away because the health consequences are in the future and unknown; whereas, the pleasure is present and known.
They are more driven by present, known pleasure than future, unknown pleasure.
This is a key point!
The same thing occurs when creating wealth.
It requires you to make known, short-term sacrifices (pain) to reach an unknown, long-term goal.
This is not an easy sell and it is one of the major reasons why fewer than 5% ever retire with financial security.
Below is a sampling of comments I’ve heard reflecting this dilemma:
- “Retirement is so far in the future that it’s like another lifetime. Why bother with all the hassle right now when there are so many other urgent issues competing for my limited time and money. I’ll get around to it someday. There is plenty of time.”
- “I’m afraid to take on investment risk because it could result in losses. I don’t like to bet my hard earned money on an uncertain outcome. Who knows what will happen? I worry about investing.”
- “I don’t understand investing and don’t like all the math and numbers. Learning about it makes me uncomfortable.”
- “Living on less than I earn so that I can save and invest the difference means sacrificing lifestyle today. I really want the new car, new outfit, or swimming pool now. Maybe I will begin investing next year.”
- “Learning about investing and personal finance means spending time today for a future benefit tomorrow. I have other things that are bigger emergencies like work, phone calls, television, soccer practice, and making dinner.”
How many of these examples can you relate to?
Each example illustrates how pro-actively building your wealth requires you to regularly seek out and tolerate short-term pain and discomfort.
This creates resistance because we are motivated to seek immediate pleasure now.
Pain and discomfort de-motivates us.
The reality is life will always provide you with alternatives that bring more immediate pleasure than building wealth.
Similarly, there will always be a more pressing emergency or fire to put out in the short-term that could be rationalized as more urgent than building wealth today.
Wealth is a long-term goal that will never appear important in the short-term – and that is a problem.
If you want to succeed at creating wealth in your lifetime then you need a different paradigm than most people typically live under.
You need to find immediate and deeply gratifying pleasure in the act of building wealth.
You need to change your viewpoint from sacrifice to satisfaction if you ever want financial freedom.
But how do you do that?
Short-Term Thinking Kills Wealth Creation
What gets people into trouble with smoking or wealth is short-term thinking.
They give greater priority to what is most immediate rather than what is most important.
That is a critical point so read it twice. Wealth is important, but it is never urgent.
If you want to create wealth you must prioritize your life in a different way.
You cannot prioritize according to urgency or you will never succeed.
Imagine what would happen if you began prioritizing how you spend your time and money according to a long-term perspective.
It would turn every example in this article on its head and reverse the outcome.
In other words, short-term thinking is our automatic mode of operation.
We deal with what is immediate and compelling.
However, your life would be very different if all decisions were viewed from a long-term perspective.
If the smoker prioritized the long-term she would never take another puff.
The short-term pleasure from the nicotine would pale in comparison to the long-term health consequences of smoking.
Similarly, if you prioritized your long-term financial health then your spending, saving and investing patterns would completely change.
The short-term pleasure of the expensive new outfit or car would pale in comparison to the long-term pleasure of financial freedom.
The reality is most people make daily decisions based on daily concerns.
If you want to create wealth you need to make daily decisions based on long-term concerns.
This may sound like it requires super-human discipline, but that is not my experience or the experience of my coaching clients.
It’s really just a change of perspective that results in changed priorities.
It is easier than it sounds.
Your objective is to get into balance by emphasizing your most important, long-term goals in every daily decision you make.
You don’t need to worry about emphasizing short-term concerns because the outside world will automatically take care of that for you.
Your consumer desires will be well nurtured by advertisers and other relationships in your life will all demand their needs be met.
The short-term, urgent stuff takes care of itself so you must take care of the long-term.
Only you can prioritize what is most important to you by balancing your long-term needs with all the urgent matters of the day – because if you don’t then nobody else will.
The unfortunate reality is your long-term goals will never happen unless you pro-actively make them happen.
The Illusion Of Short-Term Pain
The truth is saving, investing and learning about personal finance is inconvenient.
It requires you to take time and money away from other activities that provide immediate gratification.
Most of us are busy so the last thing we need is something more to do.
This is a primary obstacle to creating wealth.
The problem is if you don’t overcome this obstacle then you set yourself up for even greater pain in the long-term.
If your goal is to minimize the total pain in your life then it is much easier to confront mole hills of short-term inconvenience than it is to dig out of a mountain of long-term pain.
If you want to retire early and wealthy you have to stop thinking short-term and start thinking long-term.
Satisfying every short-term need will crowd out the ability to satisfy long-term goals like wealth, health, and fulfillment.
This is a critically important concept.
For example, you may prefer to read the latest bestselling novel instead of a book on investment strategy.
There is nothing wrong with that unless that’s all you read for twenty years.
After twenty years most of the fun reading will be long forgotten, and the price you paid for prioritizing entertainment over usefulness will be a lower financial intelligence.
The consequence of low financial intelligence is reduced investment performance, more mistakes, greater losses, and less wealth.
Similarly, you may desire a pint of gourmet ice cream more than a little exercise, and there is nothing wrong with that in the short-term.
However, if you make it a regular habit then there will likely be health consequences to pay over the long-term.
Additionally, there is nothing wrong with driving a nice car and wearing fancy clothes that fill the closet of your expensive home.
However, after twenty years of prioritizing current lifestyle over wealth the compound effect of such spending practices is staggering.
Your easy opportunity for creating wealth through long-term compound returns will be wasted while all those coveted consumer items will be worn out and gone.
The point is that what appears to be the least painful solution in the short-term is usually the most painful alternative when viewed from the perspective of twenty or forty years.
This is a key point!
There is nothing wrong with giving yourself a treat occasionally: the goal here isn’t austerity.
The focus is creating long-term habits that take you toward what is most important in your life.
Your regular habits are what matters because your health, wealth and happiness are largely a result of your daily habits.
If you want to solve the problem of short-term thinking just begin habitually making your decisions from the perspective of twenty or forty years.
It will dramatically change your decision process, and it is at least as valid as the alternative.
After all, what could be more painful than working all your life and retiring in poverty?
That is the long-term consequence of poor financial habits.
Do you think it is easier to deal with the relatively minor inconveniences of saving and investing now so that you can comfortably compound those assets into a secure retirement, or would you prefer a little cushier life now at the expense of desperation and fear as you approach your golden years?
What seems more painful to you?
Long-Term Wealth Is The Least Painful Alternative
What’s it going to take to motivate you into action so that you can retire early and wealthy?
Are you going to be the financial equivalent of the cardiac patient who lives for transient, short-term pleasures only to wake up at fifty or sixty years of age when the long-term consequences are undeniable, or are you the rare individual who can see the writing on the wall and pro-actively balance the long-term consequences with short-term realities by getting into action now?
I emphatically encourage you (picture me pounding my fists on the table and screaming at the top of my lungs) not to procrastinate.
Financial freedom will not magically take care of itself no matter how much you trust in the future and believe in the abundance of life. You must pro-actively create it… period.
Don’t live in denial.
I have been coaching clients on this transition from short-term to long-term thinking for years and the process follows a typical pattern:
- The first 90 days are difficult. You are fighting all of your old habits and support systems that reinforce your old behavior. An initial period of self-discipline, accountability, and support is required to get you over the hump (that is what Step One and Step Two of Seven Steps To Seven Figures helps you with).
- After the first 90 days your new support systems and habits are in place and your commitment to the process is ingrained. It becomes much easier, but you are still subject to potential backsliding.
- After the first year the rewards of your new behavior become self-evident and reinforce the validity of your new habits. Your bank account is growing and your knowledge about investing and finance is improving which gives you positive feedback. More importantly, you begin to feel different. You feel stronger, happier and more fulfilled as you begin living in congruence with what is most important in your life. You’ve made the transition.
- The final stage is when you can look back on your old way of being with dismay. Just as a non-smoker has difficulty understanding why anyone would voluntarily pollute their system with toxins, the wealth builder can’t understand why anyone would voluntarily choose to set themselves up for long-term financial difficulty. It just doesn’t make sense when the alternative is so easy. Your new patterns are now part of you and the process of building wealth is not only enjoyable, but the rewards make it positively addictive.
Ultimately, the whole process of creating wealth changes form over time.
You transform your focus from the superficial and immediate to the deeper and longer-term.
Where you used to be in love with your actions instead you learn to love the results of your actions.
In other words, people smoke because they love to smoke.
The action of smoking gives them a warm-fuzzy.
They don’t love the long-term effect of smoking.
Similarly, people don’t save because they love to not consume.
Instead, they save because they love the long-term effect of financial freedom.
Their passion for the long-term effect over the immediate action is what allows them to build wealth.
It’s all about what you focus your attention on.
You can either look at short-term actions or long-term effects.
Neither is right or wrong, but the difference in results is transformational.
Once you have made the change then actions that used to feel inconvenient or painful such as saving, controlling spending, investing, and growing your financial intelligence now become enjoyable.
Your long-term context and the obvious benefits of your regular actions have transformed inconvenience into desire.
You no longer require discipline because you are merely doing what you want.
In the end, what you learn from the process is that pleasure, like beauty, is in the eye of the beholder.
It all depends on your frame of reference.
The key is to choose a frame of reference that best serves you.
Financial coaching and the Seven Steps To Seven Figures course can help you make that change.
You Must Make One Of Three Choices …
In summary, there are three paths you can choose from when building financial security in your life:
Choice #1: No action.
You do nothing now and you will do nothing later because what looked difficult now will become overwhelming later.
You never prioritize wealth and financial security because you don’t take self-responsibility.
The result is you rely on Social Security, family, charity, and local social services for your subsistence in retirement
. You become dependent rather than independent.
Choice #2: Long-term pain.
You procrastinate on building wealth by prioritizing based on short-term needs until you reach your pain threshold in your later years.
By then, the alternatives available to create wealth will be limited because compounding requires time which is now gone: leverage and/or extreme austerity become the primary paths to reach your goal.
You may still achieve financial security but the actions required will be more drastic, the risk will be higher, and the outcome less certain.
Choice #3: Short-term inconvenience for long-term freedom.
You start building wealth today even though it is a hassle at first, but over time you notice fulfillment and satisfaction from honoring what is important in your life.
As your wealth grows you find enjoyment in continuing the habits that are in alignment with your deeper values and commitments.
You look forward to your future with confidence and security because you acted with self-responsibility by creating wealth and independence.
Every day in every way you are making one of these choices whether you consciously know it or not.
Subscribe & don’t miss a single episode of Michael Yardney’s podcast
Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.
Need help listening to Michael Yardney’s podcast from your phone or tablet?
We have created easy to follow instructions for you whether you're on iPhone / iPad or an Android device.
Prefer to subscribe via email?
Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.