Develop the 4 Habits of Wealthy People - Part 2 / 2
2. Never Trust Luck
An important habit for financial success is the habit of insuring properly against any risk that you cannot write a cheque to cover. It is amazing how many people have spent many years accumulating money and then lost it all because they did not have proper insurance policies in place. Develop the habit of using what I call "worst possible option" (WPO) thinking. Always ask yourself, "What is the worst possible thing that could happen in this situation?"
Whatever it is, make provisions to ensure or guard against it. Never trust luck.
Hope is not a strategy. Wishing is not a strategy. Only careful planning, organizing, and insuring constitute a strategy for your financial life.
Be sure that you have sufficient life insurance to cover your family and all their financial needs if something should happen to you. Be sure that you have adequate fire and damage insurance for your home. Check and upgrade your policies on a regular basis to make sure that they cover "replacement value." Insure your automobiles for damage and liability. Be sure to have adequate health insurance that covers you for any emergency and for long-term care.
No one likes to spend money on insurance, but it is one of the smartest things that you can possibly do on your road to financial independence. By insuring properly, you will never be caught off guard by an unexpected accident or emergency. An additional benefit of being fully insured is that it gives you a feeling of calm confidence that allows you to think more clearly and be much more effective in everything else you do.
3. Cover Your Assets
As you begin to accumulate money, develop the habit of protecting your estate from unnecessary taxes and frivolous lawsuits. Invest in the services of a lawyer who specializes in wills and estate planning. Set up a family limited partnership under the direction of a good lawyer and trasnfer your assets into the partnership so they cannot be seized in a lawsuit or taxed away if something were to happen to you. As the old saying goes, "A stitch in time saves nine." Small actions that you take in planning, investigating, and insuring your assets can save you an enormous amount of money on your road to financial independence.
4. Get Rich Slowly
When people make a lot of money quickly, as the result of success in the stock market, a business breakthrough, a show business success, or an invention, the story gets into the newspapers and magazines. But this is precisely because great financial success in a short time is so unusual.
Most great fortunes are built slowly. They are based on the principle of compound interest, what Albert Einstein called, "The greatest power in the universe." In fully 99 percent of cases where people become wealthy, it is over a long period of time, and it is based on slow, incremental growth as the result of compound interest.
Every dollar that you save, properly invested and protected, has the ability to grow 5 to 10 percent each year. As your money grows, it compounds on itself, and grows even more. According to Stanley and Danko, it takes the average millionaire 22 years to accumulate a million dollars from the time he gets serious about his financial life. They get rich slowly, by gradually increasing their earning ability, saving more and more from their income, and investing it carefully and intelligently so that it grows and compounds over the years. You must do the same.
An important habit for financial success is the habit of insuring properly against any risk that you cannot write a cheque to cover. It is amazing how many people have spent many years accumulating money and then lost it all because they did not have proper insurance policies in place. Develop the habit of using what I call "worst possible option" (WPO) thinking. Always ask yourself, "What is the worst possible thing that could happen in this situation?"
Whatever it is, make provisions to ensure or guard against it. Never trust luck.
Hope is not a strategy. Wishing is not a strategy. Only careful planning, organizing, and insuring constitute a strategy for your financial life.
Be sure that you have sufficient life insurance to cover your family and all their financial needs if something should happen to you. Be sure that you have adequate fire and damage insurance for your home. Check and upgrade your policies on a regular basis to make sure that they cover "replacement value." Insure your automobiles for damage and liability. Be sure to have adequate health insurance that covers you for any emergency and for long-term care.
No one likes to spend money on insurance, but it is one of the smartest things that you can possibly do on your road to financial independence. By insuring properly, you will never be caught off guard by an unexpected accident or emergency. An additional benefit of being fully insured is that it gives you a feeling of calm confidence that allows you to think more clearly and be much more effective in everything else you do.
3. Cover Your Assets
As you begin to accumulate money, develop the habit of protecting your estate from unnecessary taxes and frivolous lawsuits. Invest in the services of a lawyer who specializes in wills and estate planning. Set up a family limited partnership under the direction of a good lawyer and trasnfer your assets into the partnership so they cannot be seized in a lawsuit or taxed away if something were to happen to you. As the old saying goes, "A stitch in time saves nine." Small actions that you take in planning, investigating, and insuring your assets can save you an enormous amount of money on your road to financial independence.
4. Get Rich Slowly
When people make a lot of money quickly, as the result of success in the stock market, a business breakthrough, a show business success, or an invention, the story gets into the newspapers and magazines. But this is precisely because great financial success in a short time is so unusual.
Most great fortunes are built slowly. They are based on the principle of compound interest, what Albert Einstein called, "The greatest power in the universe." In fully 99 percent of cases where people become wealthy, it is over a long period of time, and it is based on slow, incremental growth as the result of compound interest.
Every dollar that you save, properly invested and protected, has the ability to grow 5 to 10 percent each year. As your money grows, it compounds on itself, and grows even more. According to Stanley and Danko, it takes the average millionaire 22 years to accumulate a million dollars from the time he gets serious about his financial life. They get rich slowly, by gradually increasing their earning ability, saving more and more from their income, and investing it carefully and intelligently so that it grows and compounds over the years. You must do the same.
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