Building wealth with your income 4

In my last posts, I have given some tips on how one can build wealth from his or her income. Building wealth does not necessarily depend on on how much one makes, but on the mindset and the ability to delay gratification for the long term profit. It is interesting that everybody wants to be rich, but only few can do what it takes to get there. So, why don't people get there even if they want to be there?

     The number one barrier is the lifestyle. Lifestyle does not permit many think on the long term. Your lifestyle does not allow you see your financial level so you can live accordingly. For example, I know of working class individuals making about $5,000, with a take home pay of $4,000 monthly, spend $1,200 on house rent. The irony is that they are married with children. From the remaining amount, they pay high school fees for their children. How can people living like this be wealthy?

     Never. Although each makes a reasonable amount, they spend have nothing remaining at the end of the month. In other words, they cannot build wealth. They only thing they have is their pension plan. Their struggle is always to maintain their current standard of living when they retire. That is, to assure an income of $5,000 after retirement. That is a bad plan.

     A better plan would have been to live in a cheaper house of $1,000 and use the extra $200 invested in a mutual fund. Over a period of 30 years, this amount will turn into $2.2 million. After retirement, this amount will be yielding about $15,000 monthly for you, besides your traditional pension of $5,000. The calculation I made results from only changing one thing about your lifestyle and having an extra cash of $200 every month. What happens if you save another $200 from car payment, eating in expensive restaurants, etc.? How much would you make after 30 years? Think about it!