Common Misconception of Wealth

Wealth is commonly thought to be the solution to any problem that could arise. The answer to all problems is more money but the problem is, more money does not mean less problems. The problem is the other way around. When you have more money, you tend to spend more money.

Let’s break it down like this. If you only have $40 a week for dinner because you are hurting for money, how much extra are you going to buy? You are probably not going to waste money to buy soda or snacks, you are sure not going to buy beer, and fast food is not an option. So you start looking at the options available for a filling dinner and something that will last.

Do you think if you have $200 a week to spare on food, that you would shop like this? Of course not! You will spend a lot of nights stopping by fast food chains, ordering pizza or the generic Chinese buffet up the road.

Also the amount of snacks, drinks, alcohol and high end stuff will now be added to your shopping list. How is it that someone can stretch 40 dollars for dinner a week but someone can still easily blow through over 200 a week also feeding the same amount of people?

 

What about cars?

This conversation is always one of the best ones you can have with anyone. It amazes me how people who are poor can keep the same car year after year and make it work for them but anyone who makes what they consider to be a good amount of money can magically afford a car note and extended insurance(full coverage).

Look, if you can afford to put money away in savings, building up your investments, and build your retirement. Also, take care of your bills with no doubts, be prepared for bad rainy days and have food covered, then go get your car note. The average new car note is around $500 a month for a car. That is over $6000 a year, not counting the full coverage insurance. The broke man can afford to drive a 15 year old truck for 300,000 miles and still counting. The college graduate has to trade in his car every 100,000 miles.

Why can the poor man drive the same thing for 10+ years? How can this be when a man with money absolutely needs a new one every two years?

 

Phones? Oh my..

What about phones? The poor man can keep a 100-dollar phone going for over a year easily while the wealthy man has to purchase a 1000-dollar phone every 2 years. The poor man also can make a 40 dollar a month cell phone plan work while the wealthy man pays that much for his phone alone, not counting the service.

 

Well I need nice furniture for my home…

So, the poor man goes on his market websites like Craigslist, Facebook even some local places like Habitat for Humanity to furnish his home. He spends about $150 on his living room set, about 100 per bed room and doesn’t put a lot of money into the furniture because he can’t afford too. He decides to go buy a TV for the living room which is a big investment. This brings him to his big buy of $300 on his 50-inch TV in the living room. It’s not the best TV but it makes him happy. He also picks up some used 32 inch TVs for the bedrooms at just $150 a piece.

The wealthy man starts out by driving out to some furniture stores. He knows what he wants but he wants to make sure he gets something that will last years. He starts with the living room. Finds a beautiful living room set for just 700 bucks. This includes love seat, couch and recliner. He still needs a good TV stand, luckily the ones at Walmart for just 170 will look amazing with this new furniture.

Next, the bedroom. This is his sanctuary, he needs to have the best bed because your bed is your investment for years to come. He finds the perfect Tempurpedic mattress on sale for just 899.99. But realizes he should probably get the king because it will provide extra space. Now his bed is up to 1299.99 before he has even purchased a box spring or bed frame with it built in. He still doesn’t have a dresser or night stands.

His TV has to be the best, because he is going to have all his friends over for the game. He can’t settle for just a big screen, but has to have the best refresh rate, highest color rating and strongest quality available. He finds that these TVs can get up to 4-8 thousand. But when he finds a new Samsung for just 1800, he takes it in a heartbeat.

 

The Outcome on Wealth

Both men now have their homes furnished in the living room and bedrooms, but there is one issue with this. The wealthy man now has spent so much money on his setup that it will clog up his credit cards and other loans for months or even years to come. The poor man has everything paid off and doesn’t even have to worry about his bills going up.

The wealthy man is also paying interest on a lot of his purchases, especially the ones not paid off within 12 months. The poor man doesn’t change his budget for the upcoming months since he is already past this.

The wealthy man is now living paycheck to paycheck now in order to keep up with everything while poor man is enjoying his life putting away a little in his savings to build his wealth every month.

Now what would have happened if the wealthy man had set himself up like the poor man? The wealthy man would be pretty good right now. He would be putting more and more money away in his savings. He would be living comfortably and happy. The wealthy man also wouldn’t be stressing about bills. But instead, he didn’t purchase better stuff. He purchased a better image to look better than his poor friend. But at the end of the day, who is really winning?

 

The Truth Behind Building Wealth

In today’s time, everyone worries about their image. It’s normal to rationalize why we need the new stuff. We rationalize the price to convince ourselves that these new purchases are a necessity. You hear and see it daily, or probably even do it yourself. The reality is that those purchases aren’t as necessary as you think. That phone you’ve had for 11 months that still functions does not stop working just because a newer model is released. It still does everything you need it for in our life. Yet, as a society, we classify that new phone as a necessity. We add that extra purchase or bill to our lives, even if it means taking away from our savings, our bills, our rent, or even food out of our mouths. We take comfort and security out of our lives solely for public image. When you build wealth, your financial stability and security should come before all of the extras in life.

Learning to Build Wealth by Being Poor

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