The reason most people never achieve financial success is that they don’t follow the right game plan. Here's how.
Blogger: Cam McLellan, director, OpenCorp
Building wealth through property is no different to most things in life. It’s all about mindset – if you tell yourself you can’t do it, chances are you will be correct.
On the other hand, if you have the desire to give it a go then you will more than likely find it is not as hard as it first seemed, and it brings a sense of achievement and satisfaction to your life. But if it is so easy, why doesn’t everybody do it?
The reason most people never achieve financial success is that they don’t follow the right game plan. Here are a few simple things we have learnt from highly successful investors that will help you to move ahead of the crowd in pursuing financial success:
- Understand your “why” – the reason you want to achieve success;
- Begin with the end in mind;
- Don’t reinvent the wheel, follow a proven system; and
- FOCUS (Follow One Course Until Successful).
Australians don’t like talking about money. We are a modest crowd and tend to think poorly of people who boast about their financial success. For some reason this also means we don’t like to talk about our own financial goals – and some people even think it’s selfish to strive to become wealthy.
In reality, striving for financial security is the least selfish thing we can do. After all, who will support our families if we become ill, or are injured and unable to work? What will happen to our families, or the people we owe money to, if some accident should befall us? An early retirement may not be something that drives every Australian (it certainly doesn’t excite me), but there are many more reasons to strive for financial security than the purely selfish dream of living in the lap of luxury.
According to the Australian Bureau of Statistics, 64 per cent of Australians can’t retire at the age of 65 through a lack of funds.
For many young Australians retirement is but a distant dream and as a result it is not something that concerns us. In another 30 years things will have changed, right? Think about what you need to live the life you want to live. Most Australians are comfortable being unhappy, rather than happy being uncomfortable.
Some of the most common excuses that hold people back are “What if I don’t get a tenant?”, “I’m waiting for a raise”, “I’m just too busy at the moment and I’ll think about it in six months” or “I can’t afford it”, to name a few.
In essence, all of these comments translate to: “I am scared and not prepared to take the time to overcome my fear by learning what I can do to mitigate my risks and increase my confidence.”
Make sure you do not live a life of regret because you didn’t pursue the things that you truly wanted.
Once you understand why you want to achieve financial security, you can then understand what “financial security” requires.
Is it a specific income or a certain value of assets (clear of debts)? When you jump in a taxi, what’s the first thing you tell the taxi driver? Where you want to end up.
If you provide the end destination the chances of getting there are very high, whereas if the driver were to just aimlessly drive you could end up anywhere. Financial goals are your “end destination” and once you know where you want to end up, it will make it much easier to chart your path.
The reason most people do not set goals, especially financial ones, is because they might fall short and will feel like a failure.
In truth, most of us never achieve the goals we set for ourselves – but that is a good thing, provided you set the right goals.
The biggest risk in goal-setting is not setting goals that are too hard to achieve, but setting goals that are too easy to achieve. There is an old saying about setting goals: “Aim for the stars and if you only get half-way there, then you will still have a very good view of the world.”
Once you understand what you want to achieve and why, you then need a plan to achieve your goals.
There are thousands of ways to make money in this day and age, but many of them run the risk of losing your money instead of growing it.
High returns usually correlate with higher risks – so be wary of the “deal of a lifetime”, because if it sounds too good to be true it usually is.
The first rule you should adopt when creating your plan should be, “never invest in anything that puts my principal at risk”. If you can lose some, or all, of your money (for example, by derivative trading) then you are really just gambling.
As long as you never lose your principal then you will always be moving towards your goal. Residential property in Australia has consistently returned in excess of 8 per cent capital growth per annum over the past 50 years.
Why then do you have to try and pick a winner? If this is the norm, it’s more about mitigating risk to make sure you don’t pick a loser as the average property still performs remarkably well.
The next step is to find a system that other successful people have used.
This requires lots of reading and speaking with others who share your vision. Successful people surround themselves with other successful people.
Having a mentor who can teach you what they’ve already learned through their experience will not only fast track your knowledge and give you a sounding board over time, they’ll also be willing to share with you mistakes they’ve made, allowing you to avoid repeating that mistake.
Do you know someone, or a group of people, doing exactly what you want to do? Are they applying the same principles and systems to their investing? If so, remember that they started out from scratch themselves and will be impressed by your desire to learn.
Financial success requires discipline in applying a systematic approach – and taking action. Find something that works and stick to it. Have confidence and don’t listen to the doomsayers if your experience shows that what you’re doing works.
Every successful person has a system that works for them. Donald Trump, Bill Gates, Roger Federer and Michael Jordan – they’re all the same. The thought of finding a bargain, or the deal of a lifetime, is tempting for many investors, but bargains are bargains for a reason.
Building wealth is like building a house. Lay the foundation and work from there. Set some goals, review them and understand where you want to head. It’s much better to work that out now, with time to act, than it is to learn about your plight on the eve of retirement.
If you’ve ever said “I wish I’d done that 10 years ago”, don’t make the same mistake twice!