To Become Wealthy, Think Of Saving First And Income Second
While most of us are familiar with the word "inflation," few of us actually understand it. When you ask most people to define inflation, they refer to it as being "higher prices." This isn't technically correct. Inflation is actually devaluation (falling value) of our currency.
Because our currency falls in value, prices rise as a result. Because the people who sell us their goods and services have to pay higher prices due to the falling value of the currency, they transfer their losses to us(by raising prices), and if we have our own businesses, we in turn transfer these losses to our own customers.
It should be obvious that the person who makes the least amount of money in a situation like this will be hurt the most. Even if you make a lot of money, inflation combined with taxes will gradually erode your wealth over time. While most financial experts would have you believe that you need 401Ks, stocks, bonds, mutual funds, Roth IRAs, and a whole bunch of other financial instruments in order to build wealth, they are wrong.
The true secret to becoming wealthy is to keep your finances simple, and combine this simplicity with a large amount of discipline and frugality.
While it is important to invest, true wealth doesn't come from investing in paper assets, or even large companies. It comes from investing in smaller ventures which bring the promise of higher return, but also carry a bit more risk. Most importantly, true wealth comes from saving money, not borrowing.
When it comes to building wealth, most people are like the hare of the famous parable "The Tortoise and the Hare." Like the hare in the parable, they spend all their time racing to make more and more money, thinking that the next big raise, promotion, or job will be the key to their financial well being.
In contrast, the Bill Gates, Warren Buffets, and Jim Rogers of the world are more like the tortoise. It seems that they move slower at first, but after the hare has tired and exhausted itself, they gradually get ahead of it, and by the time the hare realizes what has happened, they have made it to the finish line.
While this is not to say that having a large income isn't important, it is worthless by itself if one spends it all, and leads a life full of debt. A large income is equally worthless if it is all tied into paper or other worthless assets. Those who wish to become truly wealthy must always conserve their wealth, and invest it in things which have a high intrinsic value.
If you want to become financially well off, these are terms that you must understand. So many people today live out their lives being ignorant of these concepts, and they die in poverty simply because they didn't take the time to read and think on articles such as this. No one in this world has your best interests in mind more than you do.
Therefore, it is your responsibility to get the necessary information which will allow you to make critical financial decisions. While I've often heard people say that "they don't care about money," these people are fools. You will either understand money or forever be a slave to it. Think about that a bit.
Money Saving Tips is dedicated to helping people become financially literate. Many people today are seriously lacking when it comes to being financially prudent. We named the site "Stop Stupid Stuff" because many Americans face financial hardships, and these hardships are a result of Stupid Financial Decisions, mistakes that could have easily avoided.
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