Thursday, September 20, 2007

Accumulating Wealth - the foundational principles

Today I came across a post in another blog (Seocracy) titled "How to accumulate Wealth." Isn't that an ambitious title?? That's what I thought too. I tend to avoid writings with such titles because more often than not the content is a scam, or an inflated idea with no merits or ground, or someone's attempt to make money by making you click on numerous affiliate links that lead nowhere. But I read this post simply because I respect Rob (the author) and he always writes really solid stuff about computer geek stuff, so I was curious to see what he had to say about accumulating wealth.

Remember at the very beginning of this blog I talked about taking a thoughtful approach to making money and how important this was? Well, this is one of those posts that reinforces what I said. Rob, in his post, takes a very traditional approach to thinking about money:

The secret to wealth is this: Spend less than you earn.

The more you earn and the less you spend, the richer you become.

Isn't that simple? And yet it is so true. This is one of the foundational principles to getting wealthy, spend less than you make. It's the basics!!

Rob goes on to explain that the reason people don't get wealthy is because they are more interested in appearing to be wealthy than they are in actually being wealthy. Isn't that interesting? Think about it... did you NEED that iphone... wouldn't your old Motorola have been just as good? Wouldn't the 2003 model got you from point A to B as easily as the newest coolest-looking model? I may be over-simplifying, but take some time and think about whether your own inherent need to appear to others that you're "doing well" is doing you in. This is what Rob says:

It’s because people don’t actually want to be wealthy. People want to appear wealthy. People want to make their friends and neighbors jealous. People want to live beyond their means.

It’s this overwhelming need to appear rich that keeps people from actually becoming rich. This is one of the top reasons why people aren’t wealthier. They get caught in this crazy cycle of spending and consuming, they fall for the marketing, buy the latest trends, need the newest cell phone, and guess what?? I bet those people have no clue of what their net worth really is, or even how to calculate it. These are people who will never become wealthy.

I could go on and on, but I really encourage you to read Rob's post. It will be eye-opening, I assure you.

Then I want you to do some thinking and some math, and think about what you can do different about your spending habits, and what difference it will make. Think about how much you make versus how much you spend.

I will be talking about this some more in the near future.



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