Bankruptcy and Understanding Psychological Wealth

With this article, I want you to gain a better understanding of psychological wealth. When clients come into my office I always want to give them “the lecture” which are magic words that change their lives forever. If you are in my office then, the tire is flat and I need to fix it. Now, you know that you took risks in life, you hit a nail, and you need to file a bankruptcy. You also need to get back on the road and back to taking risks again. That’s where understanding psychological wealth comes into play.

Bankruptcy and Understanding Psychological Wealth – The Rules You Should Learn

Hopefully, I will never see you in my office again. So, take the time to go through the Dave Ramsey training on budgeting and finance. Divorce, hurricanes, disability, and other things do happen and may cause you to file bankruptcy.  If you need to do it I think my office is the best place to go so that you can get through this and get back on track. You don’t have to always lose property to get back on track. But, you do need to understand psychological wealth and how it works for you.

1. Realize poverty is a mental state. In a study called the millionaire mind, it was discovered that everyday people bus drivers, parking lot attendants, and school teachers were able to accumulate over a million dollars in savings and investments because they paid themselves and their investments and savings first and bills second. People retire broke because of their mental programming. Not because they had good jobs. Plenty of doctors and lawyers are broke and die broke. The exact same conclusions have been studied by many other authors. Dr. Thomas J. Stanley, co-author of “The Millionaire Next Door: The Surprising Secrets of America’s Wealthy”  Owning the mansions often insures you die broke.  Live below your means and spend less than what you earn  Just find the point that you get what you need and you’re happy and comfortable, and just stay there.  Even if you make $500,000 a year you can often be happy on $2,500 a month like David Supper a Las Vegas used car dealer who makes 500,00 and lives on less than 36,000. LL Cool pays $399 for a Honda Accord while other rappers retire broke and go back to the projects they came from because they cannot reprogram their mental attitude. Your credit will repair itself by just paying on time over time,  However, you must change how you budget and think about money or you (and your children) are doomed to poverty.
2. Pay yourself first. Most people buy what they want to pay bills second and then invest what is left over. This is exactly the opposite of what you should do. Invest first, pay bills that you must pay eliminate and shut down what you don’t need second and spending on what you want comes dead last. Putting this off until later is a sign of a poverty mindset.  You will die broke until you reverse this pattern of thinking.  Poor people also find a way to put off ever-changing their mindset. This mindset does not ask you to save $1,000 a month.  It asks you to put away $100, or a small amount you can afford. Furthermore, you can’t underestimate the power of starting a small behavior change that is repeated, by repeating it momentum builds, and behaviors are repeated. By doing that, the poverty mental cycle is broken. You don’t have to reduce yourself to ramen noodles.
3. Plan your goals and do it.  Goal setting improves your performance. Setting a goal of what you want your money to do for you gives you a much better chance of reaching your goals. By having a 5-year plan, six months income emergency fund, or saving to pay cash for a car you can see that these goals are something you can accomplish. The goals become real, reachable, and attainable. Having goals that you must obtain makes it easy to save.  Whether it is a car, emergency fund, vacation, or refrigerator doesn’t matter.
4. Retirement should be tackled early because it takes less work the earlier you start. You only have to put away $25 a month at age 20 or $50 a month at age 30 or $110 at age 40 into a program with a seven percent rate of return to earn $56,000. The earlier you change your thought process the better off you are. If you learned proper investment in high school or from your parents and start off early you don’t have to end up a loser later. The principle of compound interest makes banks one of the wealthiest industries in the world making money off of poor people mentality where I have to have it now at any cost makes the banks rich and the poor people poor. Saving for a stove is easy and putting off saving for retirement is easy. It’s really hard to change your mental state so that you save for retirement. When you can do that you have reached a mature mental state.
5. Live Cheap retire rich. The things that really make you happy are actually very simple. A simple house a simple nice clean bedroom, kitchen, laundry room. It doesn’t take millions. You don’t have to pay high-interest rates and you don’t have to own much. There is far less stress to this lifestyle and a lot more happiness. Your money works for you instead of you working for money to repay debts you have racked up.
6. Track your spending track expenses to use them. What you manage to save and what goes through your fingers makes the difference.
7. Create real financial rules that are helpful. Having set financial rules or values that you live by helping you to reach goals. Rules like you can’t spend more than $300 on something that isn’t essential to your life help to keep you from blowing 1000 dollars on that designer purse you really don’t need. Rules help simplify your life by setting standards like I won’t eat out more than 2 times a week. My favorite rules come from Dave Ramsey. I agree with him 95% of the time but he had a bad negative experience with bankruptcy.  I wish he had come to my office. Bankruptcy is just a financial tool like surgery is a doctor’s tool. Surgery isn’t fun. But if it will save your life you don’t put it off.
8. There is no such thing as the responsible use of a credit card. Paying it off or filing bankruptcy to destroy it should be your number one goal. If you cant wipe our those types of debts within 36 months when you are young consider filing bankruptcy. When you are older you may need to file bankruptcy if you can’t wipe it out within 12 months. Have only one card if you have one at all, use it for only an emergency and pay it off within 1 month.
   Increase in income. Find a way to make money from your hobby. Often a second job can make some additional money so you can invest or save more. If you have a hobby like painting houses, landscaping, etc you may be able to make a side income from that hobby. You won’t think of it as extra work because you enjoy it. But make sure that hobby actually earns you more income.  Earning more won’t lead to real higher net worth if your lifestyle expenses increase.
9. What do I need to remember from this to have a better understanding of psychological wealth?
   1. Spend Less
   2. Save More
   3. Earn More
   4. Budget.
   5. Pay off debt or bankrupt it and never borrow unless you have to for a car or home.  Even for college ask yourself is college best for me.  Often debt has such a high cost that it doesn’t buy more success, health, wealth, or happiness. There is always your emotional, spiritual, psychological, and social intelligence and health.

I hope this gives you some insight into understanding psychological wealth. If you have any questions, feel free to use the contact information below to contact me.

Resources for Bankruptcy

Louisville Kentucky Bankruptcy Forms

Bankruptcy Manual

Other Related Information

Western Kentucky Chapter 13 Bankruptcy Rules

Chapter 13 Plan Modifications

Chapter 7 Attorney Fees in Louisville Kentucky

9 Tips to Help You Save Your Home from Foreclosure

If you are thinking about filing bankruptcy, don’t delay because timing is crucial. I am here to help you. So, contact my office right away to start the conversation. Nick C. Thompson, Bankruptcy Lawyer: 502-625-0905