In today’s financial world, the definitions of the terms wealth and income have been used interchangeably hence creating a notion that the two are synonymous. When asked, at the very least most of us would prefer to be wealth builders and not income earners. I’m no exception... This therefore implies that despite our ignorance in interchanging the two terms, each of us has an idea of what wealth and income are. In his book, The Richest Man in Babylon, George S. Clason points out that a man’s wealth is not in the wallet he carries and that a fat wallet quickly empties if there are no golden income streams to refill it. His input therefore leads us to an understanding that there is indeed a connection between the two terms. Well the puzzle is, ‘what qualifies a man to be a wealth builder and another an income earner?’ and ‘where is the connection anyway?’
Without a doubt we can all fill a list of wealthy people from our various vicinities. What’s makes them wealthy? Simply, whatever they own. We regard them as wealthy because we know they own businesses, land, buildings and the different available financial assets such as shares and bonds indifferent of the consumer durables (such as cars and household items) they may possess. One key distinctive element here is the ownership of assets. Let’s not make this feature too accounting oriented but could we borrow some understanding of what an asset is? My loyal accounting tutor reminds me that an asset is simply an item that yields revenues or probably gains to whoever has rights of ownership and or control over it. An individual’s wealth will therefore be the net value of his or her assets after deducting the debts.
The wealth builder
One important characteristic of a wealth builder that definitely reigns overall is his mindset. We know that setting up a business or a building takes huge amounts of time, money and energy while the benefits can only be reaped in future. On earning his wage he (wealth builder) sets aside a small portion of it for the purchase of assets that will yield revenue in future. To garner enough money to acquire assets, he is compelled to live an austere lifestyle that will guarantee minimal expenses. Quite clearly this is a conservative, long – term thinking mindset. Unfortunately many of us would loathe it. Well, he doesn’t rest there. He is also careful enough to acquire quality assets that will yield a considerable return depending on the amount invested. You will therefore spot him in discussions with experts in the field he intends to invest as he tries to evaluate possible outcomes with their help. At the end of the day, his efforts are rewarded with a probable gain on the assets value overtime and regular cash inflows. A wealth builder will hence be said to be wealthier than another by the amount of time that the assets inflows could sustain his living expenses without him working.
The income earner
Have you ever wondered why the highest earning professionals in town are not necessarily wealthy? Well, it’s simply because they’ve perfected the art of income earning. Is there a problem with huge income earning? George S. Clason notes that whatever we call our ‘necessary expenses’ will always grow to equal our incomes unless we protest to the contrary. It’s no wonder that the moment you receive a salary increase or may be a higher paying job, ‘needs’ begin to pop up from all the possible corners. The end result, no money kept aside for investment even with a ‘fatter’ salary. In a nutshell, we could say that income is the sum total of inflows of cash to an individual when he provides a service or product and those from independent assets (say, profits of a business).
While a wealth builder’s mindset is long term and conservative, that of the income earner is completely the opposite. The income earner’s lifetime is dominated by a struggle to maintain a quality lifestyle depending on his earnings in a certain period. He is hence the type you would brand the ‘irrational’ buyer.
Ultimately, being wealthy is an enviable financial state. It is however the end result of consistent wealth building. The question is, ‘Are you willing to dedicate yourself to being a consistent wealth builder?’
Hello my dear friend! I wish you a wonderful Thursday ! Greetings from Brasil! Follow me back please.
ReplyDeleteHi there just wanted to give you a quick heads up. The text in your content seem to
ReplyDeletebe running off the screen in Internet explorer.
I'm not sure if this is a formatting issue or something to do with internet browser compatibility but I figured I'd
post to let you know. The style and design look great though!
Hope you get the problem resolved soon. Many thanks
My page :: http://youthfootballhelmets.net/
For a new investor, investing in property can offer a tremendous opportunity to create wealth. New investor should have Commitment to learn investment strategies. Nice blog!
ReplyDeleteCustodian Wealth Builders
Building wealth is often difficult, but with these tips, it doesn’t need to be. I am impressed with the way you have shared these steps.
ReplyDeleteCustodian Wealth Builders Forum