If you want to be rich. You have to think rich. But what does thinking rich really mean? Should you be thinking about driving a new German car? Or perhaps the rich only wear the latest fashionable designer clothes? Of course if I want to think rich I have to spend like I’m rich, correct? Certainly, when someone thinks about being rich, it means they can have access to all the material wealth that they want without the fear of missing next month’s mortgage payment. It might be possible to go out and buy whatever you want right now because you’ve saved up your money, but does that make you rich?
I like to define rich differently. In a way, I like to think of being rich as just being financially independent. Where the requirement to work is optional, because there are passive ways to make money that will pay for your wants. The goal seems logical and simple enough, but yet many of us will not achieve this. We would all love to be able to buy the material things in life without having to work. The way you think about money and the way you respect it goes a long way to accomplishing this goal.
One of the ways people like to feel rich is by “keeping up with the Joneses”. The greatest symbol of wealth to most people is the ability to see it. If you wear Armani suits, Hugo Boss shoes or have Louis Vuitton bags, we all get the perception that the owners of these products are rich. When you get your pay check and you are able to afford these luxury goods, it makes you feel rich. Just think how many people you see walking around with Canada Goose jackets in the winter time that cost well over $600. Do you think most of those people walking around would define themselves as being rich? So what really makes a person rich if not for the symbols of designer clothing?
Those that want to look rich can easily achieve that by spending their pay checks they earn and worrying about things later. These might be the individuals that budget poorly and end up being short at the dinner table while asking their friend to “cover” for them. They might have the money at the moment to buy the material things they want, but soon they realize that the money that was spent was actually for the month’s rent. People who spend their money first and worry about the necessities later tend to feel like they are playing catch up all the time. They might run up credit card bills to pay for necessities because their pay checks went to the latest and greatest cell phone that just came out. An individual falling into this category is certainly not rich, but having difficulty understanding the priority of money. This is why software programs such as You Need A Budget was invented. To help people visualize where their money needs to go and what is really left over for material wants. Those that keep playing this game will inevitably run down the road to ruin.
For people that are much more prudent and understand that budgeting their money is important, they are no doubt in better shape. These individuals are might be prudent savers and they understand that the necessities need to be paid first before buying things that they want but don’t necessarily need. Savers reward themselves by using money that they’ve saved up to buy something that they might consider a luxury item. Expensive purses, watches, or cars are some of the things that may fit into the mould of that luxury item. Despite the notion that these people don’t go into debt, are they rich? Most would probably say not because they will tell you that money is a finite resource. They fear running out of money. Despite the fact that they will purchase luxury wants, they may sacrifice things they desire because they fear that they will one day run out of money. If you were rich, certainly you wouldn’t care about running out of money?
People who want to be rich and think rich understand that they don’t want to be working for their wants. They want their money to work for them instead. Rather than buying their material wants with money they earn at their jobs, they buy their wants through interest that they earn from their investments. The more interest you make, the better things you can buy. Simply saving is not enough because one day you will spend it all and it will run out. If your money works for you, it will perpetually pay for the things that you want. People who think rich understand this concept. Achieving this makes you financially independent. Even if you were to buy small menial items with just earned interest, you won’t think you’re rich, but also you’ll get this feeling like you got it for free. And what a wonderful feeling that is.
This is why saving is not enough. Saving only delays the inevitable that you will one day exhaust it all after you retire. If you don’t make the savings grow, then it will never be able to sustain you cost of living in the future. Also saving by itself gives you no reward for the present. If you spend your savings now, then all you are doing is taking away from future wants that you might have. You are essentially shifting your rewards from the future to the present, but that means your future would be bleak and crappy. If you invest, on the other hand, then you have a better chance that some of your gains can be used for rewards now, while the rest is saved for later.
The next time you see someone walking down the street and showing off all their luxury wares, wonder to yourself, is that person rich because you think they are, or did they just mortgage their future for the present?