The other day I was out to dinner and drinks with friends.
We were catching up on a lot of things, and then the inevitable came up: WORK!
People started discussing what was going on with their current jobs – office politics, promotions, changes in management, etc. Eventually, someone began discussing pay.
One individual triumphantly announced that they had received a sizeable pay increase, and everyone began congratulating them.
This got me thinking about how much emphasis our society puts on income.
I have a lot of conversations with people about finance – it’s what I do. 🙂
The overwhelming majority of people are focused on ways to grow their income, which is one of the reasons I’ve written many articles about that topic.
People will ask me how they can make some extra money, usually with the goal of being able to spend it on something they are interested in – vacations, new clothes, etc.
The kicker is, if people would shift their focus from growing their income to growing wealth, they’d put themselves in a much better financial situation.
WHY WEALTH IS BETTER THAN INCOME
Wealth isn’t just about amassing great amounts of money, it’s about obtaining true control over your lifestyle.
The reason why I think there is an issue with focusing on income is because it isn’t a direct predictor of wealth.
There are countless studies and reports about how the average individual doesn’t have much wealth. (See here, here, and here) But it can be difficult to see which of your friends are truly wealthy when most of them are driving nice cars and living in lavish houses.
That’s because most people are spending all of the income they are earning, and aren’t using it to grow real wealth. (The Common Traits Of Millionaires You Should Follow)
If a person is earning $1 million each year, but they are spending every penny of it on a high-priced lifestyle, then they have no true wealth, just a really expensive lifestyle.
If their income goes away, they will no longer possess the means to live that lifestyle, and will have lost the control to live the way they want.
HOW TO GROW WEALTH
There are many ways to grow wealth, but it really boils down to 3 things.
- Earn money
- Save money (i.e. – DON’T SPEND IT ALL!)
- Invest the money and grow wealth
The ironic part of this article is that in order for you to follow these steps you first need to earn money, which means you actually do need to focus your initial efforts on income. 😉
But in order to grow wealth, you need to take steps 2 and 3 seriously, and not get lost in the “spending mentality” that most people get sucked into. (How To Avoid The Financial “Raccoon Trap”)
To learn more about how you can execute these steps, check out the following articles in reference to each topic area:
- The Five Things You Can Do With Your Money (And What The Wealthy Do)
- The 5 Key Reasons Why Real Estate Investing Is Awesome
No matter what stage of the process you are in, you have to remember that earning an income isn’t enough; not if you intend on obtaining true financial freedom.
You have to use that income to build wealth.
Only if you are able to execute upon this strategy will you be able to experience what so few do – true control over your lifestyle.