In my review of The Millionaire Next Door, I discussed the differences between being rich and having wealth as described in that book. In today’s social media-driven world, appearing rich is very important. Mostly because individuals want to appear they are “making it” in life. However, choosing to look rich will cause financial problems in the future. Instead, choose wealth.
Why Choose Wealth?
You should choose wealth instead of being rich because of the following reason:
Being rich means you have a large amount of money, however you must work to continue making money.
Having wealth means you have many assets which make money without labor so you don’t have to work.
Examples Of Rich People You Shouldn’t Emulate
A good example of rich people you shouldn’t emulate are sport stars and popular musicians. Both groups earn a large salary, but both must continue to work to earn that large salary.
An NFL star can sign a large contract but blow out his knee at the start of the season. If his contract doesn’t contain guaranteed money, he’s not getting paid. This is a large reason why many athletes become broke after retiring. Here’s a Wikipedia article dedicated to athletes’ personal finances.
Musicians fall into the same trap. They can sign lucrative record deals, but if the musicians isn’t writing and/or producing their own music, they have to tour to earn money. To earn money without working, a musician can earn royalties by writing a song. You can check out this article about broke musicians.
Examples Of Wealthy People You Should Mimic
If you want to choose wealth, these are the wealthy people you should take guidance from:
- Warren Buffet
- Bill Gates
- Jeff Bezos
Why did I pick these individuals? For one, they all dress like “regular” people. You won’t see this trio decked out in the latest fashion labels. They all dress like they’re doing to a business lunch or a golf course.
Also, these men took an idea for a business, built it, reinvested their profits to improve it, and then took additional profits to invest it in other ventures to solidify their wealth. In turn, these assets continue to make money even when they sleep!
How To Choose Wealth
To choose wealth has two steps:
- Control your spending
- Invest in assets
There’s no complicated formula to become wealthy. Plus, anyone can become wealthy, even on a regular income. All you have to do is control your spending and invest your money into assets.
Ronald Read, a janitor, did just that. When he died he had $8 million dollars in his estate, even though he earned a regular salary (the article doesn’t state the exact amount).
This article featured a social worker with a net worth of $1.4 million dollars. We all know social workers don’t make much money in their career. The average salary being about $46,000. That woman lived below her means yet still had a good time in life.
As for me, I earn an salary slightly above the U.S. median income. I’m single without kids and my expenses are fairly low. Because I have plans for my money, I’m saving as much as I can. Hence, I cook most of my meals at home, I drive a paid-off car, I buy clothing only when needed (and when it’s on sale), and I have inexpensive hobbies (reading used books and fishing to name two). Because of these habits, I’m able to invest more money which will grow due to compound interest.
This Lifestyle Sounds Boring. Why Can’t I Enjoy My Money?
You can enjoy your money, but I suggest to do that less often. We Americans are used to excess. Frankly, our poor today live better than various kings and queens in the past. That’s how much better life is now.
Appearing to be rich starts a habit which is costly to maintain. Remember, you become wealthy by investing in assets which make you money. Fashion is not an asset. Vehicles aren’t assets. Jewelry, for the most part, isn’t an asset. And going out to restaurants, bars, and clubs definitely aren’t assets!
In the end, pretending to be rich causes you to go broke. However, you will look cool doing so.
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