Do you want to become rich? Outside of hard work and determination, critical thinking is perhaps the most essential part of your journey toward financial freedom.
However, let me warn you: schools and (most) parents do not teach critical thinking. Instead, you will have to build your brain (through reading) and mindset (through action) on your own.
Today, I want to explore the path toward becoming a critical thinker and why it’s so vital to achieving financial success. You will need to use critical thinking as you create and execute your lifelong budget. Let’s begin.
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What is critical thinking? Critical thinking is the ability to generate multiple outcomes from a single scenario. You must have experience to envision multiple pathways to success.
The good part is that you can get some experience from reading books. A book is a collection of someone else’s experiences.
However, you cannot just read; you must act. The combination of reading and taking chances is what makes you a critical thinker.
Let’s look at a simple example. Let’s say Josh found a hill of red ants on his one-acre lot. There are many things he can do: walk by them, pour water on them, or spray bug killer on the nest.
Josh decides to buy some bug killer and spray the nest because he has small children at home. Additionally, Josh sweeps the rest of the property to exterminate any other nests. He also creates a calendar reminder to sweep the land every month for bugs.
Josh is a critical thinker. He knows that these bugs can be dangerous for his kids; therefore, he takes the situation seriously. He also documents and records his actions for easy follow-up.
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Critical thinkers always win. The average person doesn’t like to think because thinking is a complex process. It’s much easier to come up with one solution, or, even better, create no solutions.
How to become a critical thinker. You are not born a critical thinker; you must make yourself one. A good place to start is by asking “why” five times.
Let’s say your phone bill goes up $20. You can ask: Why did my phone bill go up? Did my habits change? Did everyone’s phone bill go up? Is changing carriers wise? How can I lower my phone bill?
Asking these questions will put you in a position of power when others are in a position of weakness. Asking these questions gives you leverage.
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Ultimately, life is about obtaining leverage. Critical thinkers use their brains to create and maintain leverage.
I recently bought three Nintendo Switch 2 consoles. I purchased one online at Target.com, and my wife and I waited in line at our local Target to grab two more.
Before we went to stand in line at Target, I asked my son to talk to his contact there. Additionally, we stopped by the electronics area two days prior to see how much inventory they would receive.
I knew from past experience that this would be a hot item, and I took multiple precautions to ensure I got one. I used my brain to obtain leverage (owning multiple new consoles).
How do critical thinking and becoming rich work together? You cannot become rich without critical thinking. In fact, investors are heavy critical thinkers.
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Investing is simply about making predictions about the future. Investors make multiple decisions today about an unknown future tomorrow.
However, investors use experience, knowledge, and critical thinking to make the best predictions about tomorrow. They also hedge those predictions with other investing methods.
Before you attempt to invest in various markets (stocks, bonds, commodities, cryptocurrencies, businesses, and real estate), you’ll need to learn to think critically about your budget.
In fact, your household budget is the single most crucial element on your journey toward financial freedom. Let’s use critical thinking and our budget to build wealth.
Budgeting and critical thinking. The people who stay far under budget will become wealthy. Let’s look at some scenarios.
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Let’s say you inherit $300,000 from your parents. You can invest this money at 15% and earn $45,000 a year in dividend income.
Now comes critical thinking: where can you move to live on $45,000 a year, or $3,750 a month? What other income can you create?
Let’s say you move to Florida and buy a home with a $1,500/month mortgage. You decide to get a roommate for $800 as well.
Now, you are living comfortably under your monthly allowance, and you have additional income from the roommate. Your wealth will continue to grow.
What do most people do? Most people would use the $300,000 as a down payment toward a larger home, such as $1.5 million.
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So instead of being free and building wealth, they leave the situation with even more debt. They continue to work, but often fall behind.
There will be an even greater separation between thinkers and non-thinkers moving forward. The world is simply too expensive to keep spending as we are.
Let’s say you receive a $4,000/month pension from your government job. Do you decide to live in an expensive city like New York or Los Angeles?
Or do you move to a small city or overseas? In these places, you can establish strong roots within a tight-knit community while building your wealth.
I was born and raised in San Diego, California. I moved out at age 18 and never wanted to return. I retired to a small city (Pensacola, FL), and now own five properties.
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My friends and family in San Diego do not own multiple properties. It’s too expensive to get ahead in California.
However, I can now move back to California in a position of power and create leverage for myself. I employed critical thinking to build leverage outside of San Diego, which gave me more options in the long run.
Life in a nutshell. Wealth is having more income than expenses. The difference between income and expenses is referred to as “cash flow.”
The person with the most cash flow wins. You’ll need critical thinking to increase your income (through roommates, promotions, or side hustles) and lower your expenses (such as bills, housing, or moving).
The average person should generate $4,000 per month of passive income. They can utilize social security, pensions, 401 (k) s, annuities, side hustles, dividends, roommates, businesses, and real estate.
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Once they have $4,000 per month, they must move to a place where they can thrive within this monthly budget. Once there, they can continue to build wealth, grow their resources, and leverage their opportunities.
Conclusion. The world is becoming scary. Schools will not teach your kids to think critically about anything. Trust me; my son just graduated from high school.
The only way to pass critical thinking on to your kids is for you to become a thinker first. Then, you can position yourself to pass this gift to your kids.
There has never been an easier time for people to achieve financial freedom; however, they must first free themselves from the consumerist mindset—this requires critical thinking. Good Luck!
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. All Right Reserved Military Family Investing
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