Archive for March, 2012

(More) Secrets of the Wealthy

During a recent breakfast with a good friend the topic of wealth creation came up. Knowing that I work with many affluent individuals, my friend asked a simple question — What is it that the affluent and super-affluent do that others don’t?

The answer is extremely simple — since there is no limit to the amount of money you can spend (no matter how much you earn), the key lies in frugality.  In pursuing this worthy goal, a key barrier that many of the highest earners face is the pressure to impress their peers. Whether you call it the ‘rat race’ or ‘keeping up with the Joneses’, the pressure to look the part can be a significant drag on wealth creation.

Below are two encouraging stories of actual clients as well as a few thoughts on things you can do to improve your financial condition by leaving the rat race behind.

Bob (not his real name) came from modest means. He started a company and, after owning it for 15 years, sold it for more money than most people make in 10 lifetimes but he still leads a very low-key life. He could own his own plane but flies commercial. He could belong to several private clubs but after making his millions dropped the only club membership he had. Bob’s top priorities are taking care of his family and supporting the causes & organizations he feels strongly about.

Sam and Ashley also both came from modest means but over the course of their 20-year marriage, they have worked hard and spent wisely, building an investment portfolio of over $1 million (not including their retirement funds). They also have no debt of any kind. They live in a reasonably nice neighborhood in a relatively modest home and drive modest cars. Their children attend a private school because education is one of their top priorities but otherwise they live a modest lifestyle. Early in their marriage they decided to stay out of the rat race and they would tell you that this made all the difference.

What do Bob and Sam & Ashley have in common? First, they made a deliberate decision to leave the rat race behind. They can also clearly explain their top priorities and they are not overly concerned about other people’s opinion of them. Their friends are the people who appreciate them for who they are and not for the extravagance of their lifestyle.

On the other hand, there are many people struggling just to keep up. Their debt continues to pile up because they are hesitant to cut their lifestyle and this ultimately places a strain on their personal relationships.  No matter how high or low your income, there is always something you can eliminate that will help you enhance your financial condition. Making these choices is hard but I hope this post will give you the impetus you need to begin thinking in that direction.

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