Like most kids, when I was a kid, I thought of money as being primarily about earning and spending. I thought of getting an allowance, say, or getting a paper route (even though I never got one), and then using that money to buy Nintendo games 🙂
Money in & money out.
This can be very serviceable way of looking at things, yet it also can cause some people to be stuck in a permanent cycle of earning and spending. It can lead to a month-to-month type existence, which ultimately can lead to burnout or a sense of being in a constant financial hamster wheel, having to spin in a cage perpetually to keep enough money coming in.
Frankly, it can really suck.
As far as the concept of acquiring wealth, pretty much all I learned about rich people was what I saw on TV. Essentially, the idea of a rich person was someone who brought a lot of money in… heaping gobs of it, in fact, because they were a movie star, or a professional baseball player, or a well-connected diplomat, or a business tycoon. In my mind, being rich was the result of getting a big score, summarized by that glamorized concept we call “Fame and Fortune.”
These days, I have a different view of wealth, and of wealthy people. Instead of it being the oversimplified view of “BIG money in,” I understand that wealth is the result not so much of “BIG money in” as it is “LESS money out.”
In fact, it is more a result of how you manage the money you receive than how much you receive in the first place.
There are many concepts and phrases associated with this. Here are a few:
- “Pay yourself first.”
- Savings Rate
Each of these concepts looks beyond the glossy fantasy of how people make their wealth to the simple reality. That simple reality is this: people who accumulate wealth typically “pay themselves first,” maximize their savings rate, and track their net worth on an ongoing basis.
To be more specific, wealthy people or people who are becoming wealthy make sure to keep some of what they earn, which they then invest. In fact, they maximize how much they keep of their earnings, by making sure their lifestyle expenses are reasonable and maximizing savings. Then they regularly track their accumulating wealth.
Overtime, this wealth grows and grows, often to the point of what the rest of the world considers truly wealthy. It’s no big secret or complex thing. It’s no advantage of the rich. It’s something everyone can do.
The required ingredients? Time, attention, commitment, and faith.
In the end, it’s worth it 😉