This blog spends a lot of time talking about growing wealthy. When thinking of the wealthy, one often conjures up images of couples in lounge chairs at an exclusive beach resort in bathing suits and designer sun glasses, sipping on some tropical drink. Another image might be of a woman in designer clothes and with an expensive designer bag walking through the shops at Rodeo Drive or some equally swanky shopping location. Another image would be of a man in a polo shirt swinging a golf club at an exclusive country club. If you’re thinking that this is the lifestyle that awaits you, and that is your reason for wanting to become wealthy, I’m afraid you’re sadly mistaken.
While these are the stereotypical images, many of these people are not actually wealthy at all. They may have a large income, but they spend most of their income as fast as it comes in each month. In fact, while the person earning $40,000 per year may have balances on credit cards of a few thousand, these individuals may have balances of tens of thousands of dollars. They are in fact far more broke than the typical person in the middle class. If they lost the source of their income, foreclosures and repossessions would come fast and furious as they are merely renting their lifestyle.
The wealthy people would be found in more modest settings. Shunning the McMansions, they would be in older but well-built homes in the established neighborhoods (their homes would probably have been built in the 1940’s). Rather than shopping at the Galleria, they would be at Sam’s Club (but not too often) or maybe at the pawn shop where they know they could get things at less than retail. They may very well be using coupons in the super market and be buying the store brands for many of their purchases. People who become and stay wealthy know how to handle money is such a way so as to “have their cake and eat it too” – to have their wealth and get what they really need too.
Rich people do not go around spending their money frivolously. If they did, they would not be wealthy for long. They become rich because they have learned how to save and invest. How to handle money wisely. The would sooner set their money on fire than buy a flashy new car they know will drop in price like a rock. After going through all of the work to become wealthy, they don’t want to return to their old lifestyle. So what is the point of amassing this wealth if one can’t live the lifestyle of the rich and famous?
Having wealth means having security and freedom. If you have a house that is truly yours – not one that you rent from the bank – you don’t need to worry about making the monthly mortgage payment. The house is yours and can’t be taken away from you. If you lose your source of income, at least you’ll have a place to live.
Likewise, getting other necessities of life does not depend on your job. You could lose your job and survive indefinitely. You could quit your job and take one for far less pay but that is more rewarding.
Also, when you have money in the bank, the things in life that are a crisis if you’re living from paycheck-to-paycheck are minor inconveniences. If the car breaks down, you take it to the repair shop and write a check. If you need a new roof on your house, you buy a new roof. If your air conditioner quits working, you buy a new one. You no longer need to deal with loans and credit. You could care less what your credit score is because you are not going to be borrowing money. You’ll also find that when you’re paying cash, you can get a discount on a lot of things.
Growing wealthy is not easy. It takes sacrifice. While friends are going on cruises and taking trips to Europe, you may be staying local. While the Jones’ are getting new cars every few years, you might be driving an old beater to work. While friends are buying huge places with a bonus room and a pool, you might be in a modest three bedroom place.
In the end, however, the feeling of security and freedom are worth it. There is nothing like telling the guy at the car lot when he asks if you’ll need to finance the car, “No, I’ll pay cash.” Then again, if you’re rich you’ll be buying a two-year old car from a private party anyway.
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Disclaimer: This blog is not meant to give financial planning advice, it gives information on a specific investment strategy and picking stocks. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.