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Before assuming that you aren't rich, understand what "rich" means

Being Rich

... does not mean having lots of money. There are thousands of stories where people have won the lottery or inherited a large amount of money, only to be on the streets in a few years.

The problem is our definition of being rich may be flawed.

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Before assuming that you aren't rich, understand what "rich" means

Before assuming that you aren't rich, understand what "rich" means

https://thinksaveretire.com/what-rich-means/

thinksaveretire.com

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Key Ideas

The Definition of Rich

A high income and a regular acquisition of expensive stuff do not necessarily make people rich. People may have a high income, but many won’t survive three months if they are suddenly without their high-paying jobs.

Being Rich is different from being Wealthy.

Wealthy People and Pseudo Affluence

Wealthy people have sustainable access to money, often for a very long period of time. Their habits are now aligned with the wealth that they have incurred.

Pseudo affluence, on the other hand, is what people experience when they are currently earning lots of money and start to believe that they are rich. They pay for their expensive lifestyle with a high amount of borrowed money and are just a job-loss away from being poor again.

Object Poor

... is a ‘state of excess’ when the stuff we own makes us poor, as the debt we incur has trapped us to keep working our jobs to fund the expensive lifestyle and habits.

Being Rich

... does not mean having lots of money. There are thousands of stories where people have won the lottery or inherited a large amount of money, only to be on the streets in a few years.

The problem is our definition of being rich may be flawed.

Accumulated Wealth

Being rich is, at its very core, about being patient with your money and the accumulation of knowledge, experience and your net worth. If you are investing in appreciating assets instead of spending it on liabilities (like a fancy car), you will experience true wealth.

If we curb our restaurant outings and the impulse purchases and sell the homes we don’t live in, investing the money in appreciating assets, we are on the way to maximize our investments.

Prestige And Freedom

Being rich is about freedom, about independence and about being on your own. If you are filthy rich but still have to do things you hate doing, then that’s not real wealth. You are not poor if you don’t own a BMW and your neighbour does. But you are poor if you are not having the freedom to do what you want in life.

Money

It isn’t the only factor in being rich, no matter how many articles tell you that. Money is at most a superficial and incomplete representation of wealth, and there are many more ways to think about riches.

Money changes people, and in many cases, makes them less grounded, less content and less human. If you feel unhappy most of the time, maybe equating money with happiness and success is a part of that problem.

Other Kinds of Riches

  • Friends: offer a kind of value that money cannot.
  • Family and relationships: is not experienced by everyone, and if you have this, you are truly rich.
  • Hobbies: A freedom to do what you love to do is real riches.
  • Community: A great circle of friends, neighbours, family and relatives provide us with the social riches that make us complete.
  • Happy Moments: Positive surroundings, laughs and love from the people around us provide us with untold riches.

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The wealthy
The wealthy

Most rich people do not flaunt their wealth: They don't live in high-class neighborhoods or drive expensive cars. They look like you and me.

The rich have a net worth of above $1 millio...

The pseudo-affluent

They buy things that convey success. They want you to know just how much stuff they have by showing off their success.

The pseudo-affluent feel insecure about how they compare with the Joneses and the Smiths. They hold on to the belief that all economically successful people display their success through prestige products.

Characteristics of the pseudo-affluent

The pseudo-affluent generally:

  • They earn a high-income, but spend the majority of what they make.
  • Wear expensive suits or carry expensive purses.
  • Drive high-end luxury or sports cars.
  • Really believe that rich people act rich.

It does not mean that every person that drives a BMW pretends to be rich, but those who do spend the majority of high incomes spend it in a way to display their wealth.

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Robert Kiyosaki

“A person can be highly educated, professionally successful, and financially illiterate.”

Robert Kiyosaki
Financial Literacy Questions

A financially literate person should be able to answer these questions:

  • How much are they earning after tax and after saving for retirement? Is it fair considering their education level and job title?
  • Are they earning above sector median rates, below, or on par?
  • How much goes to their retirement accounts?
  • How much goes into their investments?
  • What are the rates of return on their investments when benchmarked against an index like the S&P 500?
  • What are their financial plans?
  • Can they read a company's financial statement?
  • Do they understand their tax benefits?
  • Do they understand their retirement requirements?
  • Do they have a plan for retiring?
Characteristics Of The Wealthy
  • They live in homes just large enough for their needs and drive used cars.
  • They have affordable interests.
  • They don’t worry about having the highest credit scor...
Rich And Wealthy

By making wealth your priority now, you could be both later. Establish a strong financial foundation that will give you financial security and peace of mind moving forward. 

Living paycheck to paycheck is a guaranteed way not to build wealth.

If you’re just starting on your personal finance journey, it might not be time for you to start acquiring these assets yet.

How To Become Wealthy
  • Investing in stocks is simple if you avoid lucky stock picking. Keeping long-term perspective, invest early, especially in low-cost index funds.
  • Rental properties.
  • Small business ownership.
  • Delaying gratifications.

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