JUST BECAUSE YOU EARN $1M A YEAR DOESN’T MAKE YOU A MILLIONAIRE!

After studying the lifestyles of 600 American millionaires, Sarah Stanley-Fallaw, author of The Next Millionaire Next Door: Enduring Strategies for Building Wealth, says there’s one false belief that just won’t die; i.e. that wealth is the same as income. Why is this misconception a problem? Because sometimes individuals focus on the wrong things when trying to achieve lasting financial comfort.

Wealth can be loosely defined as a household’s net worth or how much money you actually manage to keep. Another definition of being rich is having assets generating income that is more than your living costs. Income, on the other hand, is pretty much what shows up on your tax return.

Stanley-Fallaw’s findings clearly show that, as people earn more money, many also increase their spending. “High salaries can lead to wealth,” she says, “but not if you burn through every last penny buying luxury cars or filling the closet with designer clothes.”

Unsurprisingly, her research also shows that many millionaires do earn higher-than-average incomes, but even high earners can live pay-cheque to pay-cheque if they don’t keep an eye on spending.

“It’s what they do with their income to build wealth that makes them rich; they [the wealthy] have enough perseverance to avoid ‘lifestyle creep’,” she says. “This leaves enough money left over to commit to saving, ultimately increasing net worth.”

At Bongiorno, we believe your focus shouldn’t necessarily be on what you earn but what you’re spending. To build wealth, it’s important to grow your available funds, begin a regular savings program and stick to it, and protect your wealth with insurance in case your income is interrupted. Call us on (02) 9326 2788 for more information.