It’s easy to assume that when you have a lot of money, you no longer have money problems.
However, this is far from the truth. The truth is that both the poor and rich have money problems. The key is, they are very different problems. When you don’t have money, you believe that once you have it, all your problems will go away.
Within two years of immigrating to the United States from South Korea, my family went bankrupt. We lost pretty much everything we had. At the age of 10, I experienced being evicted from our house.
I remember thinking that only if we had money, we wouldn’t have all these problems. If we had money, we wouldn’t need to worry about having enough to pay the rent. If we had money, my parents wouldn’t be so stressed out all the time. If we had money, I wouldn’t need to shy away from asking my parents for the new toy that all the other kids at school had.
However, after 30 years, I have learned that money itself – having it or not having it, is really not the solution or the problem. It is not knowing how to manage it and master it. That is the problem. And whether we don’t have it, or have a lot of it – if we don’t master it, money problems will always persist in our lives.
Money Problems of the Poor
The poor have a different set of money problems that the rich do not have.
Problem of Scarcity – When you don’t have money, you believe that once you have it, all your problems will go away. You think that if only you had more money, everything in your life would be okay. This is what I call the “I’ll be happy when…” syndrome.
You are never really content with what you have and are always looking for that next big thing that will make you happy. The problem with this way of thinking is that it keeps us in a state of perpetual dissatisfaction. It also causes a lot of stress because we are always worrying about money and how to get more of it.
Instead of saying “I’ll be happy when…” we must learn to recondition ourselves to say, “I am thankful today because…”
Zig Ziglar, the motivational speaker, used to share a story about a disgruntled lady that he met during one of his speaking engagements. She would complain about how her life was so miserable and everyone at work was so mean to her. He asked her to do one simple exercise – instead of saying “I hate it because…” to write out a list that starts with “I love it because…” And to write out as much as she could.
She came back to him weeks later and told him how everyone at work was now so nice to her. The fact is that nothing really changed at work. It was her perception that changed everything.
If we focus on what we don’t have, we will always struggle with the problem of scarcity. Let’s work on reconditioning our minds so we focus on being thankful for what we have, instead of focusing on what we don’t have.
Fear of Emergencies – When we don’t have money, we are always worried about what will happen if an emergency were to happen. We are always living in a state of constant worry and stress.
What if the car breaks down? What if I lose my job? What if my son gets sick?
These fears often keep us from being able to take healthy risks in their lives. We can’t take time off to pursue a new job opportunity. We can’t move to a new city to explore what a different environment has to offer. We are bound by our current financial limitations and this keeps us chained.
This is why I recommend having an emergency fund as the first step to mastering your money.
This is a savings account where you put money aside for emergencies. It could be 3-6 months of expenses or even more. I used to think having cash sitting in my bank account wasn’t a smart financial move since it was losing value everyday due to inflation.
However, after having experienced having enough cash at all times, I realized the emotional benefit is tremendous. The peace that enough cash provides is the real return on your investments when it comes to having an emergency fund.
The bottom line is that by having cash in your bank account, this alleviates you from worrying about the day to day and allows you to look forward towards creating a better future.
Bad Financial Advice – Too many poor get bad financial advice from people who are not qualified to give it. We often listen to friends and family members about what we should do with our money, instead of increasing our personal financial knowledge.
And friends and family members are not the worst of them. Most are just speaking from ignorance. But too many investment companies, financial advisors and insurance brokers dole out advice that is not beneficial to us. Only beneficial to their own interests or the company’s interest.
At the end of the day, our personal finances are our responsibility. Read and digest the information out there. Consult with financial professionals if you really want to. However, don’t take their word for it. Do your own research by reading personal finance books and reading awesome personal finance content like this.
Money Problems of the Rich
Just having money doesn’t solve your money problems. If you had money problems when you were poor, you’ll just have bigger money problems when you become rich unless you learn to master your money.
You don’t need to look far to get some real world examples. Just look at our friend Mike Tyson. One of the greatest heavyweight boxers of our lifetime.
According to Forbes, Tyson made over $400 million throughout his 20-plus year career through boxing. Ironically, Tyson declared bankruptcy in 2003 with a reported debt of $23 million.
How do you go from having $400 million to being in $23 million in debt?
Tyson was rich. More than rich compared to most people. Yet, he let the $400 million slip through his fingers because he didn’t have the money management skill set necessary to manage that level of wealth.
Keeping Money Safe and Invested – Like we saw in our example of Mike Tyson, Mike didn’t keep his money safe and invested. Instead, he squandered it away on luxury items like cars, houses and jewelry. He went even as far as purchasing Siberian tigers to keep as his house pets.
What he should have done was worked with a trustworthy business manager or advisor to keep that money safe and growing through smart investments. He didn’t even have to do anything fancy. If he had invested that money in low-cost index funds like VTSAX, he wouldn’t have just kept his wealth, he would have multiplied it.
When you have money. Or people know that you have money, everyone will want a piece of it. It is your job to figure out a way to keep it safe or work with trustworthy individuals to keep it safe. As you grow your net worth, continue to grow your financial knowledge. As you have more money to invest, you may want to diversify your holdings from just index funds to other types of assets such as real estate or businesses.
The only way that you can continue to keep your money safe as you get wealthier is to continuously level up your knowledge about money.
We need to understand the fundamentals of money. We need to continuously increase our understanding of money. And we need to master money.
Robert Kiyosaki says in his book, “Increase Your Financial IQ”
“It is not real estate, stocks, mutual funds, businesses, or money that makes a person rich. It is information, knowledge, wisdom, and know-how, a.k.a. financial intelligence, that makes one wealthy.” – Robert Kiyosaki
By working hard and investing in smart assets, you will make alot money in your lifetime. But the way to keep it is through continual financial knowledge.
Authentic Relationships – I do have to wonder if Bill Gates, Jeff Bezos or Elon Musk think to themselves this question whenever they meet new people.
Would they still be nice to me if I wasn’t a billionaire?
Rich people often have a hard time trusting people because they are not sure if the person likes them for who they are or for their money. It is hard to have authentic relationships when you are always worried about people’s motives.
That’s why I’m a big fan of maintaining a low profile despite your wealth. Strong relationships are the foundation towards happiness.
In 1938, Harvard set out what came to be known as one the longest studies ever done by following 268 Harvard students for the next 80 years. Harvard wanted to know – what are the key components to a healthy and happy life. And they found a clear winner
“Close relationships, more than money or fame, are what keep people happy throughout their lives.”
The first place we can start with is ourselves. I know I have a tendency to judge too quickly based on someone’s profession or perceived net worth. Instead, let’s make an effort to get to know someone genuinely regardless of their social or financial status. That is the only way to develop real, authentic relationships.
Raising Spoiled Kids – This was a concern that was highlighted in Thomas Stanley’s “The Millionaire Next Door.” Many of the self made millionaires worried that their children wouldn’t be as financially successful as they were. Or worse yet, grow up spoiled.
Because of their success, most of their children lived with a higher quality of life. They grew up not needing to worry about money. They got used to a certain level of lifestyle. This definitely is a huge worry that my wife and I both have.
We can’t deny that having financial struggles as children was what drove us towards financial success in our adulthood. Seeing our parents worry about money, both of us vowed that we wouldn’t want to deal with the same issues with our own family.
However, I have to wonder if this is like a double edged sword. We aren’t having to worry about money as much as our parents did and we are able to experience a level of lifestyle we only dreamt about as kids. However, when our kids grow up – because they got used to this lifestyle, I worry.
Thomas Stanley gives some advice that he gleaned from the millionaires that he interviewed. In addition to focusing on education, he said to create an environment that honors independent thoughts and actions. Teach our children to live on their own. So as my children grow older, I’ll heed this advice and do my best to cultivate independence in my kids. If you want to learn more about how to talk to your kids about money, check out my article here.