There is a belief in our culture today that if you make a lot of money and have a great income then you are automatically wealthy. This belief just drives me nuts. Granted, making a nice income increases your chances of being wealthy. But just saying someone is wealthy or not based on how much they make is like saying you have a good football team because you score 35 points a game. But would you still say you have a good football team if you give up 38 points a game? Of course not, but that is exactly what we do with money when we judge whether or not someone is wealthy based on income.
To continue with the football analogy, it is also important to only have a good offense (income), but it is also important to have a good defense (save money). To have a good defense with your money you must have a plan. It does not matter if you make $100,000 in a year if you go ahead and spend $110,000 in that same year. That is why we harp on budgeting so much when we work with clients. It allows you to live on less than you make and gives you the ability to put your extra money into investments that will grow over time. But if you continue to spend more than you make and don’t save, you will not win with money. Think about it, who is going to be better off in the long run, someone who makes $60,000 and lives on $50,000 and invests the rest or the person who earns $100,000 but spends $110,000?
It is a blessing to have a great income but you have to know what you are going to do with it before you earn it. But don’t take me the wrong way, I want you to earn as much money as you can doing something that you enjoy and have a passion for. Just do not be fooled, making a great income simply won’t cure your financial problems if you never learn how to manage it.