Material Possessions Don’t Always Equal Wealth
Posted on May 5, 2007
Many people think having a large amount of worldly possessions makes them wealthy. They strive to make more money so they can live in a bigger house, drive the most expensive car, wear designer clothes and have second homes, boats, planes and other worldly possessions. The average person views these people as being wealthy, but maybe they are and maybe they aren’t. Living a high consumption lifestyle does not necessarily equate to wealth! Wealth is measured in terms of the amount of time they can sustain their lifestyle if they suddenly can’t work and earn.
Wealthy people understand the difference between a high consumption lifestyle funded with passive income versus living such a lifestyle and having it consume most or all of their earned income. Wealth builders spend their earning years saving and investing and accumulating appreciating, income producing assets. They tend to live in smaller homes, drive older vehicles and forego the showiness that many high wage earners display. When they increase their standard of living, they are able to sustain it whether their earnings go up or not.
Social status is so important to many people that they are willing to mortgage their futures to impress friends and neighbors. It’s called keeping up with the Joneses! Wealth builders are patient and methodical. They are more concerned with securing their own future than they are with impressing others. They live on less than they make and invest the difference. They systematically save some of each paycheck, which gradually builds wealth. Naturally the larger percentage one saves the faster they achieve financial independence.
If you talk with people who are impressed with social status you will find that they are always “going to” start saving and investing just as soon as they can afford to. If you talk with wealth builders, they are always “going to” improve their social status just as soon as they can afford to. Those who strive for social status rarely build wealth, but those who strive for wealth very often gain social status without even trying.
Why are so many Americans impressed with people who have high consumption lifestyles and equate this to social status? I believe it is because high income people who spend lavishly become the darlings of the media. Television and print media are filled with stories about the lavish spending habits of actors, entertainers, professional athletes and others who want to impress. I can’t recall ever seeing a story about Joe Ordinary who worked hard and saved twenty or thirty percent of his income. That’s because the journey to financial independence isn’t glamorous or news worthy. Then one day Joe builds a multimillion dollar home and everyone wants to know how he did it, after all, he never had anything before.
Could obsession with star power be throttling economic prosperity? If you take away the equity in their homes, Americans have practically no savings and during the past couple of years, they have been depleting what little they do have at an alarming rate. They have become a society fixated on consumption. Spending to be noticed, spending to be accepted, spending to fit in and spending because the ads they watch on television and read in print tell them that’s what they are supposed to do. They’re bombarded with credit offers that entice them to spend more. They’re told to buy now and make easy payments. Many merchants even offer no payments for months or years. With this spending frenzy, is it any wonder people have begun to equate material possessions with wealth?
You can guarantee that you will have to work as long as you’re able and then live a reduced lifestyle in retirement; all you need to do is indulge in a lifestyle of consumption during your earning years. But, if you would like to retire early with an enhanced lifestyle, you can do that too. All you need to do is be frugal during your working years and invest part of your earnings. Sounds simple doesn’t it?
Here’s a tip! Whether you’re earn $400 per week or $4,000 per week, if you’ll take twenty percent of your income and invest it in appreciating assets, my experience is that you can create a passive income equal to your earned income in as little as 10 to 15 years. The questions are do you have the discipline to do it and is time on your side? The earlier you get started the more you can benefit. If you start at age 20 you could potentially replace your earned income by age 30 to 35. If; however, you wait until age 60 to start, it’s very possible that death or Social Security will come along and interrupt the process before you get there.
The key to financial independence is starting as early as possible and staying the course until you reach the goal. Many young people are not willing to reduce their standard of living or to make sacrifices. They’ve grown up in a consumer driven society and can’t bring themselves to do forego a few non-necessities in order to put down the proper foundation required to build financial success.
There are so many ways to become wealthy in America it’s unbelievable. You can read thousands of books and listen to hundreds of audio programs on the subject, but when you scrape away all the fluff and gimmicks, the message in all of them is the same. Building wealth requires discipline, dedication and desire, not trying to impress others with worldly possessions.
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