How do you measure wealth? Is your neighbor richer than you because he draws a salary $5,000 more than you do? Contrary to common beliefs, true level of wealth is not measured by the amount of dollars a person has in his bank.
Say for example.
You draw a monthly salary of $5,000 and your neighbor draws a monthly salary of $10,000. You have a humble monthly expenses of $3,000 while your neighbor lives lavishly on a monthly expenses of $8,000. Therefore you would each have saved $2,000 per month.
In a year’s time you would each have a savings of $24,000. With the same amount of savings, you would have lasted 8 months. While your neighbor only 3, if you were both to lose your jobs and having no impact on your existing lifestyles.
In other words, true wealth is measured by how long your money can last you. True wealth is then dependent on how much you earn AND how much you spend. So, how rich are you?
In order to work towards.
And attain the highest level of wealth, you must first be aware of your expenses. And recognize which level of wealth you are currently at right now. There are 4 levels of wealth.
The first level is financial stability. When you have sufficient liquid assets to cover your current expenses for 6 months. You will have a peace of mind should any unforeseen circumstance arises.
The second level is financial security. When you have a positive cashflow assets of passive income to cover your most basic necessary critical expenses. You will have the ability to stop working and maintain a basic lifestyle.
You can afford to channel more assets.
Towards building more passive income should you choose to continue to work. The third level is financial freedom. When you have accumulated a massive amount of positive cashflow assets of passive income to sustain your current expenses.
You will have the ability to stop working and maintain your current lifestyle. You can afford to channel all assets towards building more passive income should you choose to continue to work.
The fourth level is financial abundance. When you have accumulated a critical amount of positive cashflow assets of passive income to sustain your desired lifestyle. You will have the ability to stop working and live a lifestyle you truly dreamed of.
So which level are you at?
Self-made millionaires have the financial security of true wealth, not the fleeting rush of sudden riches. Again, contrary to popular beliefs that millionaires are more ostentatious than frugal. Research reveals that millionaires are generally more mindful about how they save, spend, and invest their money.
They look upon money as a tool. It is an important tool. They do not neglect it, but they also do not worship it.
Rich people are generally happier, but do not confuse happiness with contentment or satisfaction or achievement. These people made the money in their own lifetimes. And done that as much by saving, investing, and making careful choices about spending as by making large salaries.
Some may not be comfortable spending.
Because they have worked and saved their whole lives. One of the big choices was what they spent money on. They pay attention to what makes them happy, and have selective ways to spend on extravagances.
They tend to spend money on good investments. They spend money on things that make their lives better or easier. And also on experiences that will make their lives fuller.
But are multimillionaires really just cheapskates? Or are those little habits integral to their accumulation of wealth. And part of the reason they have achieved a level of financial comfort?
It is less about greed.
And they do not seem to take their wealth for granted.