1. “I want to make passive income”
I love when people say this because you can tell they have no idea what they’re talking about. It’s kind of like trying to identify people with bad taste: Just go to the local Hometown Buffett. They’re all there.
I hate to say it but most of us don’t need to focus on passive income, we need to focus on improving our active income — our jobs. How? By becoming more skilled, solving more problems for our bosses, and basically out-hustling co-workers.
A lot of people don’t like to hear this because it means that instead of reaching for some dream of $500/day in passive income, they actually have to do some work right now at their jobs. But your job is the most likely place you can significantly increase your income.
Solution: Get better at your job and negotiate your salary. Here’s how:
SEE ALSO: 6 productivity hacks that tripled my income
2. “If I just try harder, I can save more.”
The truth is, we all know we need to save money, exercise more, call our family regularly … but there are serious barriers to doing all of these.
There is significant research indicating that simply trying harder will not help you get started investing.
Solution: Automate your finances so you’re not dependent on your willpower.
• Personal finance is not about more willpower, including specific details on my automation system for your finances & a 12-minute tactical video
• The psychology of passive barriers (why we can’t seem to do things we “know” we need to do)
3. “I’m going to start keeping a budget”
Do you guys remember when I made fun of stupid frat-boy business ideas, the worst one being when a bunch of dudes get together and decide to start a t-shirt company?
This is like that, only for grownups. At some point in our lives, each one of us will get motivated and decide, “Yes! I’m going to track my spending.” This will last about 10 minutes until we realize it’s (1) really hard, (2) we don’t like ourselves when we objectively analyze our spending, and (3) it’s much easier to do nothing than to subject ourselves to the pain of budgeting.
In fact, I am going to quote a very wise man on this one: myself. Here, directly from my book, are my thoughts on budgeting:
“Create a budget!” is the sort of worthless advice that personal-finance pundits feel good prescribing…Who wants to track their spending? The few people who actually try it find that their budgets completely fail after two days because tracking every penny is overwhelming. Amusingly, in a 2007 survey by bankrate.com, 75 percent of Americans said they have a budget—which is complete nonsense. “There’s probably a lot of wishful thinking in this response,” says Jared Bernstein, director of the Living Standards Program of the Economic Policy Institute. “It’s probably more accurate to say that three-quarters think they should work on a monthly budget.” My kind of man: exposing the delusions of people everywhere!”
Solution: Create a Conscious Spending Plan that will let you spend extravagantly on the things you love, as long as you cut costs mercilessly on the things you don’t.
• Conscious Spending: How my friend spends $21,000/year going out
• Full Conscious Spending Plan (with specific recommendations on percentages for each category) is available in my book
4. “My friend goes on vacation 4x a year and he makes less than me!”
Your friend is either a highly skilled practitioner of Conscious Spending, or an idiot. What’s funny is this becomes more true as you get older, yet we get even more jealous. Think about it: How many times have you heard one of your parents ask the other one, “Why can’t we go on vacation like they do?” without understanding how their spending breaks down?
Odds are, they’re not conscious spenders, but rather overspenders.
The single-best book on this is the Millionaire Next Door, where we learn surprising facts about the average millionaire: 80% are first-generation affluent, invest 15%-20% of household income, buy used cars, and rarely buy expensive watches or suits. They’re the ordinary neighbors who are saving money instead of spending it on a new Mercedes.
Solution: Would you look at a bunch of blue whales for advice on losing weight? Then why would you look at your ordinary friends, who are making ordinary money decisions, and will end up with ordinary results — not having enough money — as role models? Refocus your financial aspirations to people you value and their conscious decisions, not showy displays of wealth from people who are poor role models. If you suspect they can’t afford it, they probably can’t.
See the rest of the story at Business Insider