1. Do it broke
Daymond John is a tenacious American entrepreneur who, on a shoestring budget, created the urban streetwear brand FUBU, now worth $6 million. Daymond’s journey to success was filled with various roadblocks and false starts- from losing the first $800 dollars he ever made to pay for car repairs after an accident, losing another $16,000 after throwing a poorly attended party, to sinking almost $100,000 into a makeshift factory in the company’s early days. He learnt that sometimes, your best work comes when you’re pushed against the wall.
“It makes you work things out and figure things out and get it done without the tool of money giving you a superficial high,” he says.
Talking about how starting out broke was an advantage for him, he said, “It forces me to think things through, to assess a situation from all sides, to take my time until a solution becomes clear.”
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Read more on Daymond’s idea in his book The Power of Broke: How Empty Pockets, a Tight Budget and a Hunger for Success Can Become Your Greatest Competitive Advantage.
2. Don’t spend it before you earn it
A sure way to remain poor is to keep spending money before you’ve earned it. You will be stuck in a vicious cycle of borrowing from Peter to pay Paul, buying needless things you can’t afford, and chasing money.
Additionally, debt makes you pay more thanks to interest. Nathan Morris, a personal finance expert says “Every time you borrow money, you’re robbing your future self.”
When you’re bogged down by debts, you’re always playing catch-up with the present and don’t have enough energy to move into the future. If you have to borrow, make sure the money is for worthy expenses and have a reasonable repayment plan.
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3. Money doesn’t change people
You’ve probably heard tales of people who became overnight millionaires and suddenly became intolerable. This might be one of the reasons people believe money to be evil. But the truth is that money just reveals who people are.
Money acts like a magnifying glass to people’s true personalities and intentions. If you were a generous person before having money, you’ll probably be even more so when you have more money to give.
On the other hand if someone was a jerk before they got money, they’ll probably just become jerks with money. Money opens more doors, allows one to act quicker, and affords access to more resources, tools and toys for whatever one wants to achieve.
4. Live like a student when starting a business
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He is an investment titan and the billionaire owner of the Dallas Mavericks. Cuban started out as a bartender and salesperson before later setting up his own company, MicroSolutions – which he later sold for a whopping $6 million in 1990. He made about $2 million profit from that deal.
Five years later, he teamed up with a friend, Todd Wager to create an online streaming audio platform called broadcast.com. It was bought by Yahoo in 1999 for $5.7 billion in stock. Mark Cuban is also famous as one of the “shark” investors on the TV show Shark Tank. Cuban advises young entrepreneurs to have frugal lives when starting out. “I did things like having five roommates and living off macaroni and cheese, and I was very, very frugal. I had the worst possible car- those types of things.”
5. Only paying the minimum isn’t good advice
“Spend as little as possible” might be good advice when it comes to budgeting. But this philosophy shouldn’t apply on paying off debt. While paying off as little as possible is better than nothing, it is a strategy doomed to fail. You are likely to lose steam because it will take you longer to clear your debts. If you have credit card debt, minimum payments also mean you will have to pay more in interest charges.
Solution: Always pay more than the minimum payment required to get your debt paid off quicker. When you see a significant reduction in your debt, you will be motivated to keep going and clear your debt. If you have multiple debts, pay as much as you can on the one with the highest interest rates until it’s fully paid off. Once you’re done paying a debt, channel the money you were paying to the next debt until you’re debt-free.