Why Most People Don’t Become Financially Wealthy?
Are you financially wealthy to live life to the fullest?
Many people work harder, longer and focus on how to increase their income, but the majority do not pay attention to reducing their expenses as well as how to work smarter. If you are reading this, start designing your future. Most of the time, you see people asking questions like “How to make more money”. But you do not see people asking, “How to live on $500 a month budget”.
When Income increases, expenses tend to increase proportionately. Sometimes disproportionately. Spending more than your earnings is one of the major reasons why people don’t become wealthy. I know this because I used to borrow my lifestyle from credit card debts.
How To Become Financially Wealthy To Retire The Age You Want?
Before we jump to some tips how to become financially wealthy to retire the age you want, allow me to ask this important question to you…
Do you monitor your income and expenses each month?
Most people don’t realise that you can design your life into your liking and fulfill all your wants in life if you simply reduce your expenses, increase your income, and work smarter by doing what you love to have the full control of your time.
I want to retire at the age of 55 and I am currently 49 years old while I am writing this post. My husband and I used to live pay check to pay check and was drowning in credit card debts. I quit my full time job and started to do the things that I am passionate about by mid of 2013 and spending my time now on how I want to spend it. If you want to read my story why I quit my job and why I end up working from home just Click here.
A person who earns $5K and spends $6K a month is poorer than a person who earns $1K and spends $500 a month. The $500 spender is in a much better financial position than the $6K spender.
WHY? To understand why, you have to look at the next important wealth principle below: It doesn’t matter what is your current position right now, how much is your salary, where you are located, whether you are a single mom or dad or whether you have zero or thousands in your bank account. These 3 simple wealth principles works for me and for my husband.
Become Financially Wealthy
Wealth Principle No.1: START SAVINGS
Start paying yourself first. Savings have various uses. It is used to pay off debt. This is exactly what my husband and I did several years back which reduces expenses in terms of paying your credit card interest. My younger sister also applied this principle and she was able to pay all her debts in 2 years. After paying our debts, we use our savings to invest, which increases income.
Savings and Investing, both these actions in turn go back to increasing your savings. The eventual goal of Savings is to pay out all your debts first (if you have any) and to convert it into low-risk investments that produce regular passive Income.
Become Financially Wealthy
Wealth Principle No.2: START INVESTING
Some people prefer to use high yield investments. Well, it depends also of your age. When we were younger, my husband and I are more aggressive, but at our age now (at 50’s), we prefer not to, because high risk investments increase the chances of losing capital or income, which in turn increase stress and threaten financial independence. With this, you need to choose a more secure investment like bonds, blue chips stocks or properties that will give you monthly dividends or rentals.
My goal is stress free financial independence. No credit card debts. Pay out your house/car mortgage. Remember that you don’t own a car or house if you don’t pay them in full.
Become Financially Wealthy
Wealth Principle No.3: EARN PASSIVE INCOME
The goal of investing is to increase passive income to the point where you can be liberal with your spending which means your passive income exceeds your expenses. This is the true financial independence. This is the true measure of being financially wealthy.
The more you can multiply your income by starting to save, invest and earn passive income, the wealthier you become.
Therefore, a person who has $100K in the bank and spends $500 a month is wealthier than a person who has $1 million in the bank and spends $10K a month.
So, the first person who spends $500/month can last about 16 years compared to the second person who spends $10,000/month can only last 8 years.
Time, not money and knowing your finances (the ins & outs of your money) is the true measure of wealth. This is exactly what you need to apply to live your life to the fullest. I am so blessed with my life and I am so proud and happy to share these simple principles to becoming financially wealthy.
To Conclude:
- Focus not only increasing your income or reducing your expenses, but on increasing your net worth.
- Use your savings to further increase your income, reduce expenses, and to generate passive income.
- Do this until your passive income exceeds your expenses.
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I’d love to hear your comments below – what prevents you to becoming financially wealthy?
