Eight insights on getting wealthy
“It’s better to be wealthy than rich, even if you’re poor” – Author and NYT columnist, Paul Sullivan
That is the most accurate line I have come across in the context of being wealthy. And I am going to present you with two interesting stories that will help you understand.
A fortune squandered.
At one stage in his life, Hollywood legend Johnny Depp was one of the highest grossing actors of all time. In 2018, Rolling Stones estimated that Depp made $650 million on films.
Depp’s weakness was his splurge fest. TMG – The Management Group, run by his business manager, stated that Depp had a compulsory-spending disorder. His ultra-extravagant lifestyle was sometimes in excess of $2 million per month. A 45-acre chateau in the South of France, private islands in the Bahamas, houses in Hollywood, penthouse lofts in Los Angeles, house farm in Kentucky, a luxury yacht, 45 luxury vehicles, 70 collectible guitars, and $30,000 on wine flown in from across the world.
Then came the expensive divorce.His net worth today falls in a comparatively impoverished range of $150-200 million.
A millionaire on a teacher’s salary.
Andrew Hallam worked at a bus depot in British Columbia when he was 19 years old.He had graduated from high school but could not afford to go to college.His father was a mechanic and his mother earned minimum wage.Besides shelter and food, they could not afford much. Andrew remembers being 14 years old and having to save up money on his own to buy a pair of shoes.
His tasks at the depot included washing the buses, checking their oil and mileage.A mechanic called Russ asked him what he would do if he got $10,000, to which Andrew said he would put it away for his college education. Impressed, Russ showed Andrew all the properties he owned and his entire investment portfolio. Russ was a self-made millionaire on a mechanic’s salary.He egged on Andrew to start saving.
When Andrew said that he had nothing to save,Russ pointed to the vending machine and asked him if he could buy a muffin and a chocolate bar every single day.That meant around $3.33 daily, which would be $100 every month.That money saved every month in equity would yield amazing results. Andrew began by investing $100 in a mutual fund and began to work towards becoming financially literate. Russ’ words,“You can save less than your friends but end up with much more” got him thinking about the value of compounding and starting early.
Andrew saved, invested, took up multiple part-time jobs, got a loan, and went to college.When he graduated, he had $12,000 in student debt. He worked as a middle school teacher teaching English; his first paycheque was $2,884 after taxes. He cleared his debt within 9 months by living extremely frugally. By the age of 36, he was a millionaire.He is now an author, a personal finance speaker and travels the world.
Johnny Depp – Outwardly, filthy rich.But his bank balance was haemorrhaging and he was doing nothing to stop the flow.
Andrew Hallam – A teacher from a lower middle-class home.Started saving at a very early age to latch on to the power of compounding.Was a millionaire before turning 40.
This is what we can learn from them.
The key to being wealthy is not making a lot of money.You could make obscene amounts of money and squander it away.Income is not a barometer of your financial position,wealth in the form of asset.
Being fabulously rich does not mean you are wealthy.It is the choice you make with your income that will determine whether you get wealthy, or not.Being rich may make you feel cool. Aim to be wealthy instead have your money first channelized into assets before it goes into managing an extravagant lifestyle.
Don’t mock small beginnings.You can start small,but if you start early, you can go very far.The power of compounding and patience does not differentiate, it works with everyone.Capitalize on it
Before you aim to impress, aim to accumulate.Save! With the savings,buy assets.Let these assets make money for you.That is the key to wealth creation.
Views are personal:The author is Pawan Agarwal,Director,GoodMoneyMan
Disclaimer:The views expressed are of the author and are personal.TAML may or may not subscribe to the same.The views expressed in this article / video are in no way trying to predict the markets or to time them.The views expressed are for information purpose only and do not construe to be any investment, legal or taxation advice.Any action taken by you on the basis of the information contained herein is your responsibility alone and Tata Asset Management will not be liable in any manner for the consequences of such action taken by you
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