This piece is part of a series I'm calling Money 101 and is designed for those who might not be as advanced in their personal finance knowledge and experience.
Many Americans believe that there is some great secret to becoming wealthy. They think it requires a combination of luck, vast knowledge, and a trick or two that only a few can pull off. However, the truth is that the simple “basics” are all you need to build wealth. If you read my post on how to become wealthy it's clear that simple actions lead to wealth creation.
That said, the reason so many people fail is that simple does not mean easy.
The dictionary defines "simple" as "easy to understand, deal with, use" and "not complicated." Becoming wealthy certainly is simple using these definitions. All you need to do is to spend less than you earn over a long period of time.
The dictionary defines "easy" as "not hard or difficult; requiring no great labor or effort" and "free from pain, discomfort, worry, or care." Unfortunately, this does not describe wealth-building because implementing even the simple tasks takes a few, vital charcteristics that most Americans find difficult to put into action.
The truth: The steps that lead to wealth are simple concepts that anyone can grasp. Actually putting them into action over the span of a lifetime is far from easy.
Building wealth isn’t easy because it requires the specific traits of discipline, patience, and persistence. That’s the hard part – and where the work is done.
Discipline requires that you show a measure of self-control as you spend. Rather than buying everything you want, you need to prioritize your spending, and purchase only what is most important to you. Discipline is also required when paying down debt and saving money. Instead of using your resources for all fun things all the time, you need to exercise self-denial and discipline to get rid of your debt and build your savings.
Even earning money requires discipline. Growing your income means that sometimes you have to get up early and stay up late. Occasionally, you have to complete tasks you find unpleasant. Even knowledge and skills are acquired only after you exercise the discipline to study and to practice.
Dr. Thomas Stanley notes that most of the millionaires he's studied have . He notes that "Nearly all [95%] of the top 1% of wealth holders in America reported that 'being well disciplined was very important/important' in explaining their socioeconomic success."
Patience is a rare trait in today’s world. We are bombarded with messages of instant gratification and entitlement. You deserve that expensive car now. You can put your vacation on a credit card – no need to wait until you save up the money. A 60-inch television can come home with you immediately if you qualify for in-store financing. The inability to wait to save up the money for the things we want leads to debt and financial insecurity.
Another difficulty is that few have the patience to wait for results. Your business ventures won’t yield results overnight. A good emergency fund takes months, or even years, to build. Dollar-cost averaging in your investment portfolio requires the patience of decades.
Persistence consists mainly of the ability to keep with your wealth-building efforts. It’s easy to give up when you don’t see instant results, or when you see your neighbors enjoying their over-leveraged lifestyles. However, in the long run, those neighbors are likely to have very little wealth, since most of the toys they enjoy now have been bought with debt. It’s hard to see that when everyone around you is having fun while you follow a more practical course.
Follow the simple concepts of building wealth with discipline, patience, persistence, and you will eventually achieve financial freedom. Even though the concepts behind wealth are simple, it takes hard work to put them into practice.