Making money and building wealth are not the same
Here’s why : Here’s a simple thought to get started. What is wealth? It is not your salary. It’s not your bank balance. It’s not even your investments. So, what on earth is it? And do you have it, yet? Let’s find out. Let’s say you own: a house worth £1.1m a £55k car a home theatre system, 55-inch flat screen TV with super Amoled display, & side-by-side door refrigerator Is the above a good indication of your wealth status? Nope. The problem with it is this. A little more digging will show you that: Your £1.1m house — has an outstanding £980k loan Your £55k car — has an outstanding £45k loan Your appliances — that you got on “Buy now, pay later” schemes, are now “Bought then, paying now” scheme worth 25k. This, asset (all that you own), minus liabilities (all that you owe) is called your Net Worth. And it is Net Worth, which is considered to be the most reliable indicator of your wealth — which like you saw, is entirely different from making money. In simple words, if you spend money more than or faster than you earn it — you may be making money but you certainly are nowhere close to being wealthy. Everyone says they want to be rich. However, what people really mean is that they want to be wealthy, they just don’t know it. You see, there’s a difference in being rich vs wealthy, and choosing one over the other matters. The key to building wealth isn’t a desire to become rich. In fact, it’s quite the opposite. Because while “big ballers” talk about being filthy rich and blowing cash, smart people are quietly building sustainable wealth in the background. Unlike being rich, becoming wealthy is the act of creating sustainable cash flows rather than spending money on material possessions. The definitions of both rich vs wealthy contain the word “abundance.” But while becoming rich is the act of spending money on material abundance, becoming wealthy is the act of using existing resources to create new resources.