Psychology of Wealth — How and Why Most People Fail (Part One

If you’re like most people, you envision your retirement full of fun, laughter, fancy dinners, vacations, and absolutely no stress at all. I don’t blame you; we work all of our lives with the goal of kicking back in our last twenty years or so.

I hate to break it to you, but the odds of retiring in success aren’t in your favour. Yup, all of those commercials showing happy old people sitting by the pool are lying to you, and the reality is a little more frightening.

Let me run a few quick statistics by you:

· According to data from the Federal Government, only 3.4% of Australian couples over the age of 65 will have a combined income greater than $35,000.

· More than 80% of all Australian couples at retirement age only have a combined income of $15,683 or less — That’s below the poverty line!

· Over 2/3 of Australian couples run out of money in only the first six years of retirement.

· To live comfortably in retirement, Australian couples need $26,000 per year.

As you can see from this information, those magical joy-filled days spent relaxing by the pool in retirement don’t come easy. Unfortunately, most people will fail to achieve financial success before they retire.

You’re probably wondering, “Well John, why do so many people fail at this?”

I’m glad you asked. This is the first post in a series where we talk about the reasons people fail so you can learn from their mistakes. Let’s get started.

The Situation Isn’t Hopeless

Although these facts and statistics will make your personal situation seem hopeless on paper, in reality, you can make it into that top 3.4%. If you are careful and follow a sound financial strategy, reaching your mid-sixties with more than $35,000 to spend each year is a real possibility.

This is where so many people mess up, and why so many people end up below the poverty line in their later years. They don’t plan for retirement effectively, and they think that their superannuation fund will take care of everything for them.

Sure, passive investment strategies like this will provide nominal returns, if you want to really live wealthy in your retirement years, you need something different than a “set it and forget it” investment strategy.

Many People Think They Can’t Afford to Invest

Time and time again, I see and hear from people saying they don’t make enough money to afford investments. In actuality, the less money that you make, the more you should invest!

Here’s an example: I knew a guy that spent all of his working life working as a gas fitter. He didn’t make a ton of money, and sometimes he barely made ends meet. Even so, he still invested in the stock market and bought promising blue-chip shares.

He followed guidance from professionals and took the time to educate himself on the habits and investing strategies of the wealthy. Where is he now? He’s sitting on blue-chip shares worth over $10 million and is ready to live a life of luxury once he retires.

Do you know what makes this guy any different than the majority of the population? He took the time to learn about personal wealth creation. Rather than sitting around and accepting the fact that he wouldn’t have enough for retirement, he did something about it.

He invested what he could afford not only in the markets but also in his personal financial education. Knowledge is power as they say, and the more that you know about wealth creation, the more you can make in the long run.

You’ve Already Decided

You might think “I’ll be fine. There’s no way that I’ll fall into that bottom 80%. I’m destined for wealth and prosperity.” Well, let me ask you this: Do you have any evidence to suggest this? Most likely, you’ve probably falsely put yourself in the prosperous category because you are too afraid to imagine yourself in the majority of people that fail financially.

It’s okay. I mean, do you think that the 80% want to be in that category? No! They pictured themselves living wealthy in their retirement years. Unfortunately, no matter how you imagine yourself in the future, if you fail to plan accordingly, you’ll end up failing altogether.

The truth is, if you want to succeed financially, you need more than just a false image of your future retired self. You need to start planning now and start investing in your wealth creation education while there’s still time.

If you do, you could find yourself successful and living the commercial life of lounging by the pool well into your 60’s without a care in the world.

Stay Up to Date

This is just part one of my series on the Psychology of Wealth. Make sure to follow my blog and my social media to keep up with the next post!

Resources:

https://actuaries.asn.au/Library/NANCE.pdf

https://www.investopedia.com/terms/b/bluechipstock.asp