Thoughts on Becoming Wealthy

My post titled Three Simple Steps to Financial Security included a few comments along the lines of "you need to make a ton of money" to become wealthy as well as some thoughts that making more money wasn't that difficult. I had to laugh since one of the people saying making more money was the only way to get rich was at a loss for how to recommend people do it. :-)

Anyway, I shared my thoughts on the issue of becoming wealthy as a response and wanted to list them here with a bit more detail. That said, here are my thoughts on becoming wealthy:

1. Of course it's easier to become wealthy if you make $500k per year versus $50k per year. Simple math can tell you that.

2. I believe that you need to do all you can to make as much as you can. That's why I've written posts like Maximizing Your Greatest Asset: Why Your Career is So Important. And it's also why I have a whole category devoted to making extra money.

3. That said, it doesn't matter how much you make -- you still have to control your spending. If you make $1 million a year and spend $1 million plus $1, you're doing worse than someone who makes $50k a year but spends $40k. Yes, you may have more POTENTIAL, but you can't take potential to the bank. For some stories of people who've made a bundle of money and spend that plus some, see these posts:

• It's Hard to Save Money On Only $250,000 Income

• Barely Making it on $150,000 a Year

• It's Still Not What You Make But What You Spend

4. You CAN get wealthy on what some of you would think is a modest income (though $50k is not modest, it's average). For examples of how to do this, see these links:

• How to Get Rich on $20k a Year

• How to Grow Your Net Worth When You Don't Make a Lot of Money

• How You Can Own Two Homes with No Debt on $33,000 a Year

5. My emphasis on spending less (versus earning more) is because it's more practical advice. It's easier for the majority of people to spend less than it is to make more. Again, I'm not saying to ignore the income side of the equation, but it's not that easy to increase your income. It's much easier to control your spending. For some additional thoughts on this subject, see these posts:

• Look After the Pennies and the Dollars Will Look After Themselves

• Your Income Isn't the Reason You're Not Saving

• Little Splurges Kill Your Net Worth

Comments

[suze]

I agree completely.

Controlling your spending is easier than increasing your income. It's boring, it's tedious, but it's true.

[Tim]

wealthy is a loaded word. I can live wealthy off of $50k/yr, given my standard of living choices. Someone who is accustomed to $500k/yr would be hard pressed to consider $50k/yr as being wealthy. There is an inherent economy of scales and assimilation in a standard of living.

[Lord]

A very loaded word. Most people can become wealthy enough to retire. Much wealthier than that would be rather difficult unless their wants are quite modest and they never do.

[Lily]

Great post.

Working in the finance industry has exposed me to a lot of people that make more money in 1 year than I would in a decade. Yet a lot of these people still complain that they don't have enough. Maybe they've just gotten to a point where nothing is enough, but I know many of them drop thousands of dollars getting bottle service at swank clubs on weekends.

They'll probably be okay for retirement, since they do make enough to save some even if they spend most. However, I wonder how many evenings of bottle service they can afford when they're 60. ;)