Wealth Building

4 Important Rules When You’re A Wealthy Individual6 min read

Reading Time: 4 minutes Whether you are earning a lot, or just wondering how wealthy and affluent people go by to manage their riches, we discuss it to clear all the confusions.

June 26, 2020 4 min read
Wealthy Individual

4 Important Rules When You’re A Wealthy Individual6 min read

Reading Time: 4 minutes

One of the key reasons affluent individuals could become self-sufficient is that they know how to manage the money they earn, efficiently. They use their knowledge and understanding to not only create value, receive monetary compensation, but also, they use those to use the money for long term benefits.

Now, you might wonder what does it mean to be wealthy, or is being wealthy and rich the same! Let us go at it.

  1. Think With Intention: Reprogram Your Mindset, Perspectives, and Thoughts. Control Your Fate and Unlock Your Potential. (Mental Models for Better Living) by Peter Hollins
  2. The Snowball: Warren Buffett and the Business of Life by Alice Schroeder

Wealthy and Rich, Not the Same!

The fine line separating the wealthy from the rich is their income over expense ratio. Shall we dig deeper?

So, suppose you have started a business, and you started earning a lot of money, maybe your revenue surpasses millions of dollars. On the other hand, you are also incurring the same cost to keep everything running. You should also not forget the highest cost of all, Time! Earning a lot of money by investing everything you have, including your own valuable time, regularly means you are rich. The more money you make, the richer you are.

Wealth, on the other hand, is a state of mind. The best way to measure wealth we think is the Time. Now, imagine you stop working on your business, or you retire from the job, the active income stops eventually, right? The expenses are still there, your lifestyle choices, luxuries, along with all the basic necessities you will have to pay for them no matter your earnings. So, if you have $10,000 monthly expenses and $50,000 in savings, you are a 5-month wealthy person. What if, you have a passive income, an investment that pays you without working for them? For the sake of this conversation, let’s say that you get monthly dividends or interests of $10,000 precisely the same as your expenses.

Congrats, you are infinitely wealthy as long as your expenses don’t go up!

Benefits of Money Management

Now that you understand the fundamental difference between being rich and being wealthy, which one do you think should be your goal? I bet, it is being wealthy, living a financially independent life without worrying about money. Living a prosperous life won’t come to you that easily, in case you haven’t figured that out by now. It requires careful planning, articulation, and execution. There sure are some fantastic advantages of personal finance management

Economic Security

Yes, this is the point we were saying about all along. Wealthy individuals focus their reassurance that they will always have economic security. All jobs, businesses are volatile. If you have managed your money right, then you can live well even when you lose the job.

Understand Where You Stand

Earning a lot of money might give you the impression you are well off. Sadly, this is not the case many times. Seeing your hefty paycheck, you might have grown the habit of overspending, thus leaving your bank balance, not in the condition you would expect. Managing the money means you understand what your real capabilities are and what you should spend.

Find The Culprit

So, you do understand that your expected economic condition might not be as good as your actual one. Now, if you monitor your finances and actively manage it, you can easily find out the sectors where you are being ripped off.

Do Not Miss the Payment Schedule

Has it ever happened to you that you missed paying for a bill? Through managing money, you will keep the dates on the check, you will know when and what to spend. Thus, your electricity won’t get cut off all of a sudden; you will not have to pay late fines just for forgetting to pay.

Forget Stress, Enjoy Life!

All of us like to risk it all from time to time just because we can! Now, that is not practical, is it? We can’t just give it all away, we live in constant fear. We are afraid to spend, we are scared to provide ourselves with a little treat, and we worry if we can really afford the luxury.

Here’s the good news, by managing your personal finances, by knowing your current economic foothold, and by paying everything on time, you can finally be free. You can relieve all the stress by knowing you can spend the rest money as per your desires!

How Do The Affluent and Semi-Affluent Manage Their Money?

Remember how we talked about the secret of wealthy people, and how managing money helped them reach their position? So now you must ask, how they indeed do it, what are the steps of managing money if you are an affluent individual?

I wouldn’t tell you what the best steps are, just because the ways are merely indefinite. If I had to write everything here concisely, even that would take a lot of pages, and I wouldn’t be able to explain everything right. Instead, I am suggesting 2 great books, both of them have different viewpoints, and both are immensely helpful.

  1. Think With Intention: Reprogram Your Mindset, Perspectives, and Thoughts. Control Your Fate and Unlock Your Potential. (Mental Models for Better Living) by Peter Hollins
  2. The Snowball: Warren Buffett and the Business of Life by Alice Schroeder

Why Do We Recommend These Books

1. Think With Intention: Reprogram Your Mindset, Perspectives, and Thoughts. Control Your Fate and Unlock Your Potential. (Mental Models for Better Living) by Peter Hollins

We have discussed it earlier about how wealthy is actually a state of mind. This book teaches you exactly that. Hollins has given his best to make you understand how intentional thinking works, and how by the power of your own thoughts, you can be a wealthy person. He will attack you, and change you right from the core. You will be able to manage your finances, your spending for the best just by shifting your mentality.

The author Peter Hollins is a prominent researcher on human psychology and also a bestselling author.

2. The Snowball: Warren Buffett and the Business of Life by Alice Schroeder

Who better to teach about managing personal finance than the legendary Warren Buffet! You might know Buffet is hugely secretive about his own life while he is one of the richest people. His stories, his success cannot be bounded to the money he made, but the people he touched, the philosophies he shares all these are significant. This book explores the personal life of Warren Buffet, the lifestyle; the day to day activities will give you insights about how to manage the wealth you have.

At The End

We share the philosophy that not everyone has the same definition of riches or wealth. Instead, it varies among all. Know that whatever you do or whatever your philosophies are, you should never stop learning, you should never stop managing, be it money, or be it time.

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