The Analogy of a Frog and Personal Finance

If you were to pick a frog and put it into shallow hot boiled water, the frog will instantly leaped from the pot and jump out to safety. However, if you were to pick up the same frog a little later and then put it into a shallow cold water, the frog will not react to it and will be comfortably be sitting there as it is a cold blooded animal. But, if you were to do experiments by heating up the cold pot with a very, very slow fire with the frog still sitting in it. The water will eventually rise up to 100 degrees. As any cold-blooded animal, the frog’s body will adapt to the rising heat and will adjust its blood temperature to the environment. Eventually, when the water reaches boiling point, the frog will die as a result of adapting itself to the environment without even realizing it.

So, what’s personal financing has have to do with the frog story? A lot. People who started off their career start just like the frog in the shallow cold water. The money they received by the end of the month is enough to get by since their requirement for life is low. But, as your career and salary increase so does your desires and lifestyles. As you start to buy your first car, buy your first house, started to use credit cards, your lifestyle will change incrementally but not as fast as your salary increase. As same with the frog, you will not notice that you have a debt problem since the increment is not sudden. And when you realize it, it is too late and you will end up with a huge pile of debt.

There are many paths for us to achieve financial freedom, but the majority of us choose the path of job security. How can we blame them? The education system was shaped to produce workers and not entrepreneurs. Many people realized that as the company their working with starts to prosper, the owner of the company is the one who eventually benefits and the employees usually are not much richer compared to the first day they started working there. The reality is that the boss is not responsible to make you rich, but their responsibility is just to make sure you got your paycheck by the end of the month. It is your responsibility to make sure that you will end up rich and not somebody else.

Pursuit of Financial Freedom

"If money is your hope for independence you will never have it. The only real security that a man will have in this world is a reserve of knowledge, experience, and ability." -Henry Ford

The pursuit for financial freedom is actually a pursuit to self actualisation. By achieving financial freedom, you will in the same time break the normal boundaries and stretching the limit capability of yourself. This character is basically the essence of a true millionaire. The knowledge gained during the pursuit of achieving financial freedom is much more priceless compared to the destination that you want to achieved. That is why individual who comes from rag to riches are legendary individual as these people have truly walk the golden path and gain wisdom along the way. Therefore, pursuit wealth, gain knowledge, and achieved happiness along the way.

Large income does not equal wealth

“If you are not as wealthy as you like, there is something you don’t know.” – David Wood

“Wealth is largely a result of habit.” – John Jacob Astor

Many of us make a lot of money as we progress in our careers. Many people earns a monthly income of thousands of dollars and some even much much higher. Despite the big money, they are not much the difference between a minimum wage person who earns a few hundred dollars a month. At the end of the month, these people who earns thousands of dollars are just as broke as everybody else. This is because, the higher they earn, the larger the debt that they can accumulate. For example, bigger house, bigger car, fancier gadgets would led them to bigger debt than before.

Wealth is your net worth. Inflow is larger than outflow equals wealth. Outflow is larger than inflow equals headache. Develop wealthy habit and not a spender habit and you are on your way to financial freedom sooner than you think.

The Wealth File

Everyone of us has a wealth file stored in our brain. This file has been created and developed since we are a child. Every experience concerning money whether it is good or bad experience will be stored there in our file. Therefore, for some people who grew up in family that always view money as evil, will tend to follow a negative pattern. Negative thinking on money such as "Rich people are bad people..", "Money don't buy happpiness..", "Rich people are not happy", "Having money will atract criminal" and so on will be stored in our file and therefore creates a self-sabotaging attitude towards accumulating wealth. Be aware of this wealth file and try to store it with good experience related to money whether through self experience or other people's positive experience. This will in turn create positive thinking about wealth and therefore translates wealth creation into reality.

Want to increase wealth? Be comfortable with uncomfortable

"The only time you are actually growing is when you are uncomfortable" - T. Harv Eker

People who are always working out in the gym and building their staminas and bodies will always exercise until their body feels the pain. They know that the body only grows when it is stretch beyond its comfortable zone and the pain signifies growth for their muscle. The same thing goes in accumulating wealth. You will never grow your wealth to an astounding limit if you are not willing to leave your comfort zone. By investing your money and taking risk, you will definitely be in the uncomfortable zone. And by being in that zone, the higher percentage it would be for you to outstrectch your wealth to the limit that you dream of.

The Roots Create the Fruits

Imagine a tree. Let's suppose this tree represents the tree of life. On this tree there are fruits. In life, our fruits are called results. So we look at the fruits (our result) and we don't like them; there aren't enough of them, they're too small, or they don't taste good.

So what do we tend to do? Most of us put even more attention and focus on the fruits, our results. But what is it that actually creates those particular fruits? It's the seeds and the roots that create those fruits.

It's what under the ground that creates what's above the ground. It's what invisible that creates what's visible. If yu want to change the visible, you must first change the invisible.

Excerpt from "Secrets of the Millionaire Mind by T. Harv Eker