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Are You On Track to be Wealthy or Poor?

Have you ever wondered what it would be like to be rich? What would you buy? A new swimming pool? A tennis court? Maybe, you’d build a brand new house for your entire family to enjoy? Whatever the case, it sure is nice to think about the endless possibilities of wealth isn’t it? The real question is, are you on track to becoming wealthy, or do you have a poor person mentality?

The Defining Difference Between the Wealthy and the Poor

Do you ever notice how poor people compare themselves to one another? Sure, they might brag about the latest toy that they “bought” or the most recent vacation that they took (compliments of their credit card), but ultimately, if they really want to compare apples to apples, they try to estimate the hourly wage of the other person. Most people don’t do it intentionally, but if your friend is a nurse who makes $25 an hour, and you are a mechanic that makes $14 an hour, I bet you’d feel poor in comparison. On the flip side, if you were the nurse and you friend was the mechanic, you’d probably feel quite wealthy!

This mentality of comparing an hourly wage is the poor man’s way of thinking. After all, your friend could be a doctor, but he might be in debt up to his eyeballs! He’s probably still got his 6-figure student loans, a huge mortgage, and a few car loans! If your only debt is your $80,000 house, you might actually be more wealthy than your doctor friend!

Those that are wealthy define their financial status not by their income, but by their net worth. After all, when you’re 70 years old, what’s going to matter, how much you made each hour or how much you’ve saved over the course of your life? The key is how much you’ve saved over the course of your life.

How to Improve Your Net Worth

Whether you make $10 an hour or $100 an hour, it really doesn’t make much difference. What matters is how much you are investing for the future. Sure, it might be easier to invest if you’re making $100 an hour, but you’d be surprised how easily one could spend that amount of money. If you want to be wealthy, you should be participating in most of the action items below:

  • Live well below your means
  • Increase your income (perhaps by a grand per month?)
  • Avoid most forms of debt (especially if they’re funding depreciating assets)
  • Have an emergency fund (so you aren’t forced to borrow at a high percent)
  • Invest if your company 401(k) or Roth IRA
  • Build up your own business (and reinvest the earnings back into it)
  • Invest in real estate
  • Accumulate passive income

Notice that I did mention increasing your income. While this isn’t really necessary, if you can up your income by a grand per month, think of how quickly you could increase your net worth! Even if you struggle to increase your income, all you have to do is live below your means and stay disciplined, and you’ll be able to watch your net worth grow and grow!

Enhanced by ZemantaThis post is from Derek who writes at Life and My Finances.

2 comments to Are You On Track to be Wealthy or Poor?

  • What bothers me is knowing how well I would use a high hourly wage. If I were making $50/hr I would reach financial independence unbelievably fast. I know enough to work at increasing my net worth, and I want to build up passive income. This would be so much easier if I could earn those high wages, I would be able to increase my savings rate, speeding up the FI process.
    Poor Student recently posted..April DividendsMy Profile

    • admin

      It is great that you have the tools necessary to use money wisely. Hopefully, you will start making more and more and be able to achieve your independence.