YouTube is full of videos of kids telling their followers how the became millionaires quickly. We see some kid driving a Lamborghini to prove to everyone that they are rich, a lesson in how they did it and then a product at the end. They mostly lease these cars for $1,000 a day and are nothing more than a prop in getting people to buy their Get Rich Quick products, but people are impressed by it. This guy has a Lambo, he must be wealthy. It asks the question, what does being wealthy look like to you?
Have you noticed all the 181 and 182 cars on the road this year? A new car is an obvious display of wealth. And the cars seem to be getting bigger and more expensive. Unlike a home, you can parade yourself around in an expensive car and be seen all over town in it and get comments from people. Is a car a sign of wealth though? With PCP finance, you can get on the conveyor belt of making car repayments without actually ever owning a car at all. But no one need to know that. In fact, some of my wealthiest clients drive bangers. They have no interest in cars, other than to get them from A to B.
What about your home? Your home is your castle. However, a big house usually means big debt. While at least this is an appreciating asset that you can sell in the future tax free, you will endure decades of monthly mortgage repayments along the way. Money that could have been used to accumulate wealth.
I wrote recently about the income trap. Just because you earn a large salary, it doesn’t mean you are wealthy or will become wealthy. You may be able to pay for large purchases out of cashflow instead of savings but you may spend all your money and have to maintain this ability to earn to continue to enjoy your lifestyle. If you don’t actually save money, you will not become wealthy.
Being wealthy doesn’t involve outward displays of wealth. Being wealthy means having actual assets of value so that you are financially independent i.e. you no longer have to go to work to generate an income so you can continue to enjoy your lifestyle.
Unless you are lucky or in the top 1%, it takes a long time to becoming wealthy. Building wealth is a long and quite boring process. It involves going without now so you can use that money to grow in value over time so that you have more of it in the future.
We get just 12 pay cheques a year. We have to pay all our bills, spending money, save for holidays etc and save from just those 12 pay cheques. It takes years to be able to accumulate enough money so we have achieved financial independence. No point in spending the money now to give the impression that we are wealthy ahead of time.
To you, what does wealthy look like? I would be interested to hear your opinion. Email me at steven@bluewaterfp.ie