Part of what makes a millionaire a millionaire is not just their obscene yearly income, rather it’s their mindset which allows them to play defense with their money.
If you were to take a longitudinal case study, and track two people with very high incomes throughout their lives, you would notice that the one that plays defense wins the net worth race. Race? Defense? Since when is making money a sport?
Let me explain why this is important to you and can be applied to you even if you’re broke. It’s not about how much money you have, or how big your income is, it’s about your out look on life and the steps you take to manage the money that you already have.
Good money management training should begin when you have 1 dollar, not when you’ve got a lot of it and have wasted away a large sum. Today I’ll introduce you to one money management technique used by the millionaires. You can use this technique to defend the money you make online.
First Cost vs. Life Cycle Cost
If you’ve ever bought something because it was the cheaper, more thrifty version, then pay special attention. You might be going about your spending all wrong and not playing proper defense with your cash-money.
Certain purchases like clothes, furniture and home improvements are very much susceptible to errors in life cycle cost analysis. This is where buying cheap turns out to be more expensive, due to future repair and replacement, than if you purchased quality up front.
Many people are discouraged by paying a larger sum up front because they don’t do the math of the life cycle expenses. Dr. Thomas Stanley, who gave us the 13 Success Secrets of Real Millionaires interviewed over 1000 millionaires and came up with some interesting results.
- Furniture purchases. Dr. Stanley’s interviewed showed that real millionaires were likely to purchase an antique dining room table for $10,000 because it could be refinished and repaired. While not modern, this type of table is aesthetically pleasing, can be passed on to your children, and retains it’s value throughout the lifetime.
- Clothing purchases. Wealthy people are likely to buy shoes which one would consider to be too expensive. However, they will wear them often, resole them when needed, and hold on to them for many years. Contrast that with a college student who buys $100 sneakers and switches them up frequently. Who is really paying more money per shoe wear?
- Home improvements. To hire a pro or do it yourself? That is the question. While it may seem cheaper to do a repair yourself you may want to take a couple of factors into consideration. If you’re doing the plumbers job, who is at work doing your job? You’re losing money. If a repair needs to be made, or your faulty installation endangers your family, who is to answer for this?
I’m going to keep this list short in order to give you a feel of what life cycle costs are all about. In the comments section I would like you to share your real life experiences with utilizing this system to defend your dollars.