Mistakes for wealth creation 2

In my last post, I wrote about one of the most common mistakes people make about creating wealth for themselves. In this poat, we will look at another common mistake we make. The mistake is looking at the wage increase and inflation adjustment as a way of maintaining standard of living or wealth.

     From my experience of working with executives, I have come to realize one common area of addiction of all. I generally have argument with them about wealth creation. The common belief among them is whatever it takes to maintain their current standard of living with inflation adjustment is alright. Even when they make investments, they will be counting on the return that will maintain the current purchasing power of their money. I tried to show them that this way of thinking is wrong. As a result, some live in expensive houses of about $1 million dollars, but do not have any investment. 

     My argument is that one should accumulate as much capital as necessary to be giving him or her good and sustainable return. The support to my argument is that someone with $10 million cannot feel any type of inflation when compared with someone with $500,000. The person with $500,000 did not invest because he thinks the return is small and cannot keep up with his current standard of living. The point I am making is that inflation affects everybody, but not at the same rate. The wealthier one is, the less is the effect of inflation and vice versa. 

     In summary, fighting for wage increase through inflation adjustment is not a way to build wealth. Rather, wealth is built by having patience and accumulating a lot of money through investment. Think of that!