THE REAL MEANING OF WEALTH I remember when my income first broke through the $150,000 mark. Louis, my accountant at the time, was amused by my innocent astonishment at making so much money. “Welcome to the world of the rich,” he told me. “Come on, Louis,” I said. “I’m making barely more than one and a half grand.” “Think of it this way,” he told me. “When you have a family income of less than $50,000, it’s a struggle. When you make between $50,000 and $150,000, you have everything you need and some of what you want. But when you make more than $150,000, life is good. You can live in a beautiful house in a safe neighborhood, drive nice cars, go out to dinner once or twice a week, and do some traveling.” “But what about the mansions, yachts, and private jets?” I asked. “I still can’t afford those.” “Those are just toys,” he said. “$150,000 per year is all you really need to live a full, rich life. And here’s the interesting thing:This doesn’t change in any meaningful way when your income passes $200,000, $300,000, or $400,000. In fact, it doesn’t really change until you are making more than a million dollars.” Back then, I only half understood what Louis was trying to tell me. Now, I think I get it completely.
Step 1: Recognizing Reality 15 There are four basic income levels: 1. If you have a family income of less than $50,000, it’s tough to make ends meet. 2. If you earn between $50,000 and $150,000, you are getting by. Your bills are paid and you can afford some small luxuries, but you have to be careful. 3. When your family income exceeds $150,000, you are living well and want for nothing (unless you have 10 children). 4. When your family income exceeds $1 million, you can spend money without much thinking. You don’t need a budget. You can be extravagant. But making a million dollars does not increase the quality of your life—and it does not, in itself, guarantee that you will have financial security till the end of your days. What it does do is make saving infinitely easier. Because unless you are completely out of control, you will be able to save most if not all of your after-tax income that exceeds the million. And saving is key to jump-starting the Automatic Wealth program. So if you can get your income above a million, you can get rich, relatively quickly, merely by saving. And that may happen simply by following the advice I’ll be giving you in Step 3. But if your primary income doesn’t grow so dramatically, don’t despair. You can still achieve financial independence in a relatively short period of time (less than 15 years, certainly; probably less than 7) by developing additional streams of income. I’ll tell you how to do that, too.
BEING RICH IS NOT JUST ABOUT HAVING MONEY IN THE BANK One of the most active discussions that ever appeared on the online forum for ETR, my daily e-zine, was in response to the simple question “What is wealth?” This question prompted a deluge of interesting answers, from the mundane to the pragmatic to the philosophically problematic. Answers like these:
A million dollars in the bank
Having everything you want
The power to command results
Being loved by your family and friends
Having tangible assets sufficient to meet the physical needs of yourself and your loved ones
Having a balanced life
Inner peace and spiritual enlightenment
Excellent health and immunity from disease
This is just a small sampling of what our readers had to say, but it gives you an idea about how varied and sometimes vague our thinking about wealth can be. And although I recognize the sense in many of these definitions, I find it impossible to talk to people about wealth unless I can get them to agree on some basic terms. So let’s do that now. I suggest that we start with this definition:Wealth is a store of something valuable. I like that definition because it is simple and because, no matter what it is that you value, it emphasizes something essential about
ARE YOU A SAVER OR A SPENDER?
As I see it, the wealth-seeking world is divided into two camps. In one, you have the wealth accumulators: men and women who are cautious about spending but eager to save and invest. The other camp is populated with spenders: men and women who are obsessed with things. They spend all their spare money, and often much more than that, buying things that say “rich” but actually impoverish them. To become wealthy, first you need to build a small nest egg by spending less than you earn. Simple, huh? But not if you don’t have the selfdiscipline to do it. We’ll be talking more about this in Step 3. Meanwhile, keep in mind that even though the material things you hunger for are indisputably of value, unless you have the financial capacity to keep them, to maintain them, and to replace them, you don’t have wealth. You simply have its obligations. wealth: the idea of storage. Having the things you desire—say, a big house and fancy cars—does not make you materially wealthy if you don’t have the wherewithal to keep those goods over a protracted period of time. Nor are you wealthy in friendship if the many friends you have now would abandon you if your fortune changed. The point I’m making here may be too obvious to mention: that wealth is only sometimes about money. Understanding wealth in a broader sense, with implications that go beyond dollars and cents, is essential. Yes, the main purpose of this book is to help you become financially independent. But you want financial independence for specific reasons:
You want more freedom in your life. You want more choice about where you live, how you live, how much you work, and so on.
You want more leisure in your life. You don’t want to feel compelled to work 8 or 10 hours every day, or five and six days every week.
You want more tranquility in your life. You would like an end to the stress that the lack of money sometimes causes.
You want to be able to sleep easily at night and enjoy your days without worry. These goals are wrapped up very tightly in your desire for wealth— and as a result, they are a fundamental part of every step in my Automatic Wealth program. Let’s push a little further along this path and delve a little deeper into the way you think about your life and the things you value.
Click Here to Purchase this Book