You need more than just a big income
In order to enjoy financial independence, it’s important to ask yourself this question: “Am I truly wealthy?” But, what does that actually mean? All too often people mistakenly believe that they are wealthy when, in fact, that’s not always the case.
After all, earning a large income doesn’t necessarily convert into a high net worth at the end of the day. Income does not equal wealth.
Moreover, true wealth is built over time by taking clever, active steps. Having lots of money is all very well. However, it’s not what you earn, but what you do with it in the long run, which will make all the difference to your life
The illusion of wealth
Do you merely want to look rich, or do you truly want to be rich? There’s an important distinction here. It’s relatively easy to create the illusion of wealth. However, it’s another question entirely of whether or not you will be able to maintain this façade. Besides, “keeping up appearances” can be both physically and financially draining.
Creating the mere illusion of wealth is certainly not a reflection of true wealth. If anything, the illusion of wealth is often accompanied by a mountain of debt, which is lurking in the background
A debt – driven society
There’s no doubt that credit can be incredibly useful. But, it’s also a slippery slope. With the cost of living constantly rising, it’s no wonder that many people are becoming more and more indebted.
These days, credit is readily available to just about anyone and it is being used and abused as a result. And, the more you earn, the more creditors are willing to extend you credit, regardless of whether or not you can actually honor those debts
Hence, it’s a sad reality, but a lot of people are not as wealthy as they seem. They are merely using debt to create an illusion of wealth while the banks own everything. It doesn’t matter if you live in a luxury home and drive a fancy car.
If you rely on monthly salary, then you haven’t built any real wealth at all. Bad debt hinders true wealth creation. Hence, it’s best to avoid it at all costs if you want to prosper.
Being truly wealthy means that:
- you have specific, financial goals that you’re working towards;
- you use a budget to plan your finances;
- you are not over-indebted;
- the banks don’t own everything;
- you consistently save;
- you have investments as assets;
- you benefit from the power of compound interest;
- you have an emergency fund;
- you’ve created passive sources of income; and
- you are determined to achieve financial freedom.
How to get started
Consider the following questions:
- How much do you currently earn?
- How much have you saved and invested to date?
- What are you putting into savings and investments each month?
- Do you have any assets?
- What amount of money is going into expenses each month?
- How indebted are you?
- What is your current net worth?
Assessing your situation will help you to take a step back and get an accurate view of the current state of your finances. Once you’ve answered all these questions honestly for yourself, you will be in a much better position to start building true wealth.