Hey everyone, and welcome back to the blog! Today, I want to dive deep into some thoughts I've been refining about what truly constitutes wealth and success. We live in a world obsessed with income statements and the latest designer buys, but I believe that's often a superficial view of financial well-being.
That's why I've distilled my philosophy into a few core principles, and today, we're going to break them down:
1. "People have Money. Rich have Assets."
This is where it all begins. When I say "people have money," I'm referring to the common perception that having a high income automatically equates to being rich. You might have a fantastic salary, a healthy checking account balance, and even a decent amount of cash on hand. But if that's all you have, you're essentially on a financial treadmill.
Money, in this context, is often transient. It comes in, and for many, it quickly goes out, covering expenses, liabilities, and perhaps a few luxuries. It's a snapshot of your current financial flow.
Assets, on the other hand, are the building blocks of true wealth. An asset is anything that puts money into your pocket, regardless of your active labor. Think about it:
- Real Estate: A rental property generating passive income.
- Stocks & Investments: Shares in companies that grow in value and pay dividends.
- Businesses: Even if you're actively involved, a well-structured business can generate profit beyond your direct efforts.
- Intellectual Property: Royalties from books, music, patents – income that continues long after the initial creation.
- Valuable Skills & Knowledge: While not directly financial, these can be leveraged to create assets.
The rich understand that accumulating assets is the path to financial freedom. Their focus isn't just on earning more, but on intelligently deploying their earnings to acquire things that work for them. This creates a self-sustaining financial ecosystem, where their wealth grows even when they're not actively working.
2. "People always look at your success by how much you earn. Rich look at your success by what you own and made."
This quote directly follows the first and delves into the societal perception of success versus the reality of true wealth creation.
The "how much you earn" metric is pervasive. From school, we're often encouraged to pursue high-paying careers. When we meet someone new, one of the subtle, or sometimes not-so-subtle, questions people assess is often related to their income level. High salaries are applauded, promotions are celebrated, and a big bonus is seen as the ultimate win. And yes, earning a good income is important – it provides opportunities and security.
However, this metric can be misleading. Someone earning a massive salary but spending it all, accumulating debt, or having no investments isn't truly successful in the long run. They are high-income, yes, but not necessarily wealthy.
The rich, however, play a different game. They measure success not by their annual income, but by the value of their asset portfolio, the equity they've built, and the impact of the businesses or ventures they've "made." They understand that true success is about building something enduring, something that generates value independently of their direct labor.
- Did you build a profitable business from the ground up? That's success.
- Did you strategically invest in real estate that appreciates and generates rental income? That's success.
- Did you develop intellectual property that provides ongoing royalties? That's success.
This perspective shifts the focus from merely being a high-paid employee to becoming a builder, an owner, and a creator of value. It's about leaving a legacy of owned wealth, not just earned income.
3. "Real richness is not what you earn, it's how much you spent"
This one often throws people for a loop, and it's perhaps the most counter-intuitive, but in my opinion, it's the most profound. At first glance, it might seem like I'm advocating for rampant spending, but the opposite is true.
Let me clarify: "How much you spent" here isn't about conspicuous consumption or frivolous purchases. It's about understanding the cost of your lifestyle and its impact on your ability to build wealth.
Think about it:
- If you earn $100,000 and spend $95,000, you have $5,000 left to save and invest.
- If you earn $50,000 and spend $25,000, you have $25,000 left to save and invest.
In the second scenario, despite earning half as much, you have five times more capital available to acquire assets, pay down debt, or invest in your future.
Real richness, then, isn't about the size of your income; it's about the size of the gap between your income and your expenses. The wider that gap, the more surplus you have, and the more quickly you can convert "money" into "assets."
This quote encourages us to:
- Be mindful of our spending: Distinguish between needs and wants.
- Prioritize saving and investing: Make it a non-negotiable part of your financial plan.
- Avoid lifestyle creep: As your income grows, resist the urge to inflate your spending proportionally.
- Live below your means: This is the foundational principle for anyone aspiring to build true wealth.
In essence, real richness is measured by your financial freedom – your ability to live the life you desire without being tethered to a constant paycheck, thanks to the assets you've accumulated. And that freedom is directly impacted by how efficiently you manage your spending relative to your earning.
So, my friends, I encourage you to rethink your definition of wealth and success. Stop looking at income statements and start focusing on your balance sheet. Shift your mindset from just earning money to acquiring assets. And most importantly, understand that your journey to true richness begins not with how much you make, but with how smartly you manage how much you spend.
What are your thoughts on these principles? Do they resonate with you? Let me know in the comments below!
Until next time, Vamshitesla.
