The title of this blog might sound a little crazy – and on the face of it, it is!
But when you actually delve into what these terms like “rich” and “wealthy” mean, it starts to make a lot of sense.
Being rich is great, but it isn’t necessary (or sufficient) condition for becoming wealthy.
Here’s the reasoning:
Being rich is all about having a large income. When you think of somebody in this category, your mind immediately focuses on business leaders, lawyers, doctors, and other high-flying professionals.
Notice, though, what you’re focusing on. You’re looking at a person’s income – the amount of money they have going into their bank accounts across a finite period – say, a year.
Income, however, has nothing to do with wealth. You can have a person earning $500,000 per annum who still feels poor. When you add up the costs of their city-center penthouse, cleaning services, holidays, private education fees, and taxes, they have relatively little money left in the kitty at the end of the month. They might not have any savings at all.
Wealth, though, is different. It’s essentially a pile of money invested in productive assets that produce even more money, usually just by sitting there.
What’s more, you can build wealth without being rich. You don’t need a massive income or a high-flying career. The trick is to consistently put away money year after year and be relentless about it.
Strategies To Adopt
If you visit the ARQ Wealth website, you’ll find a list of strategies you should adopt if you want to build wealth. The most important is putting away money every month and resolving not to touch it for a long, long time.
Market returns tend to fluctuate massively from year to year. Just look at what’s happened in 2020. But over the long-term, they smooth out. And eventually, you can find yourself earning a decent annual rate.
You have to commit for the long-haul, though. Investments aren’t something that you can dip in and out of, as and when you like. It takes time and commitment. Unless you leave them to grow, they won’t. And all your hard work and effort to save will go to waste.
Other essential strategies include using tax-free saving vehicles, stress-testing your financial plans, and creating them in the first place. But the main point still stands: consistency is vital.
You don’t have to save a considerable amount of money each month to wind up with a large retirement fund in thirty years’ time. Let’s say you invest $500 per month for 30 years and get a market return of 8 percent – not unrealistic. By the end of the period, you’ll have $704,275 in your balance – that’s a significant amount of money.
If you invest $1,000 per month at the same rate, you’ll wind up with $1,408,500 and so on. What’s more, around three-quarters of the money will be interest earnings. Your actual contributions are only a small portion of the pie.