The Definition Of A Rich Person

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.

... 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.

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.

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.

Over the long term, it's not as much about the dollar amount you save, but the percentage of your income that you dedicate to saving and investing. By focusing on percentages, you can ensure you're always saving more as you earn more. 

Most people react to their finances. The problem with that is that you rely on chance to have enough money in the bank when you actually need it. Be intentional about your money and spend time reviewing and evaluating it. If you don't, you'll never know if you're moving in the right direction or not.

Get to working on improving your finances today, not tomorrow. Reading the steps and thinking you’re capable of doing it but postponing it is just an excuse, an unprofitable one.

Talking about your financial goals, and scheduling time once a month to go over your finances together can prevent money from affecting your relationship.

• Create a full inventory of expenses in front of you: Categorize them into fixed and variable; urgent and non-urgent; necessities and luxury; avoidable and unavoidable.
• You can create a hierarchy of needs and decide which one’s to address first. It’s all about prioritizing. 
• Accept that you have limited resources and unlimited wants. But you have to manage your resources. The sooner you accept this fact, the better you can control your impulses towards avoidable expenditures.

It’s a statement wherein you can jot down your assets and liabilities.

• Pull together your bank statements and other proofs of the liabilities
• List down your assets like the bank balance, all investments, home value, and value of other assets.
• Take a sum of all the assets to arrive at the total value of your assets.
• List down your liabilities the (car loan, home loan, credit card balances etc.)
• The sum of all the liabilities will show the value of the money you owe.
• When you subtract the value of liabilities from assets, you get your Net Worth.
  

You’ve probably heard that time is your greatest investing asset. It’s true. The more investments earn and grow on their own, the greater they become.

Investment value is also greatly impacted by the amount invested.

• Productive assets are investments that internally throw off surplus money from some sort of activity. 

• Each type of productive asset has its own pros and cons, unique quirks, legal traditions, tax rules, and other relevant details.
• The three most common kinds of investments from productive assets are stocks, bonds, and real estate.

• It means investing in common stock, which is another way to describe business ownership or business equity.
• When you own equity (the value of the shares issued by a company) in a business, you are entitled to a share of the profit or losses generated by that company's operating activity.
• Equities are the most rewarding asset class for investors seeking to build wealth over time without using large amounts of leverage.

Banks don’t like to give away their money. That mindset is reflected in the interest rates of checking and savings accounts of 0,5% and 0.9% avg. annual interest respectively.

When you deposit your money in the bank, the bank turns around and invests that money at 7% a year or more. After they collect their profit, they give a tiny shaving of it to you.

• Your portfolio reflects your long-term wealth building investment strategy – not the short term. It includes everything you own. Your retirement accounts, your investment accounts, even your home are types of investments.
• Diversification is a way to describe owning multiple types of investment assets. Diversification is smart because you both protect yourself from failure and position yourself to take advantage of multiple robust methods for building wealth.