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Updated: January 1, 2021
If you’ve found your way on this site, you are probably seeking a path to save money and build wealth. The first thing you need to ask yourself on your wealth-building journey is whether you really want it. You may roll your eyes and ask, Who wouldn’t want wealth? But I mean truly want it. For example, who wouldn’t want to be in good physical condition? It’s very possible and pretty straightforward. Yet, how many people are at their target weight? Everyone knows how to get there—take in fewer calories than you burn. But how many people are willing to actually do that? A better question may be, who wants to be in good physical condition enough that they are willing to do the work and make the sacrifices required?
Obtaining wealth is similar to losing weight. They’re both simple mass-balance equations (sorry, I’m an engineer). To lose weight, burn more calories than you take in. To be wealthy, all you have to do is spend less than you earn. It’s really a simple task that everyone already knows how to do (in theory). But then why do so little actually ever achieve it? How is it that people spend their entire lives living paycheck to paycheck, with little to no retirement savings at the end?
Do you want savings and wealth enough to do the work required? Just like losing weight, it depends how strong your “why” is behind the objective. I believe we are all ultimately after financial independence (having enough income without being dependent on an employer or job for that income), but we all have different “whys” behind that goal.
Wealth vs. Income
First, I want to address why I keep using the phrase “building wealth” instead of “making more money.” There’s a difference. Almost everyone earns money and has some sort of income. But very little have appreciable amounts invested, or even a few months’ worth of cash in a savings account. And a larger income does NOT equate to accumulating more wealth. In fact, your time to financial independence is more dependent on your savings rate than on your income level.
It all goes back to the mass balance equation (accumulating wealth = spending less than you earn and investing the difference). That’s it. Many people who make very high incomes still are not wealthy because they spend more than they earn. In fact, the entire idea behind one of my favorite books, The Millionaire Next Door, is that the wealthiest people are often the last people we’d expect. They live in modest homes, drive modest cars, and care little about impressing others with “stuff.” Those people who live in huge homes, drive luxury cars, and think the things they buy brings them status, are most likely in debt (or at least have no appreciable net worth) due to their high spending levels.
If you want to be wealthy, simply spend less than you earn. If you want to get wealthy (and achieve financial independence faster), simply increase your savings rate (savings rate = amount saved / amount earned).
Is it Bad to Want Wealth?
Do you love your job? A couple years ago, Gallup released poll results that showed 85% of the world is not engaged at work. Why do we spend most of our waking hours working at something we don’t feel passionate about? Or something we at least don’t hate? Because of money. We rely on our incomes for survival, and it can be difficult to find a job that we love and also pays our bills.
What if you had enough wealth such that you didn’t rely on your income for daily survival? You would have the freedom to do what you want. The freedom to choose how you spend your time. This is how money buys the most valuable resource of all—time. If you have time, you have freedom. This is what financial independence is.
Even if you do love your job, achieving financial independence doesn’t mean you have to quit. It just means you no longer have to rely on that job to support your daily life. If you decide you don’t want to work anymore, get a manager you don’t get along with, or lose your job, you don’t have to worry about money.
It seems that it’s a popular viewpoint today to associate being wealthy with being evil or greedy. However, most people build their wealth from a starting point of 0 (or, more commonly, less than 0, since so many start out with debt). They work hard to increase their income and reduce their expenses. And then these people go on to do great things with this wealth that benefit other people.
I want others to be financially independent so that they can live their best lives and, as a result, have a positive impact on society. In fact, that’s my reason for writing this blog. I want to show you that accumulating wealth and achieving financial independence is something anyone can do, just by having the right mindset and setting a few good habits.
Can I Buy Happiness?
How many times have you heard “money can’t buy happiness”?
No, you can’t go buy happiness from a shelf at your local Target. And no, money doesn’t buy you great friends or a life-long marriage directly. But what if you had enough wealth such that you could spend more time with your spouse or kids, instead of working overtime to make ends meet? What if you had the money to visit your friend who lives in another state? Again, money buys the freedom to choose how to spend your time, and to spend time in ways that make you happy.
Does travel make you happy? Do concerts or sports games? Taking music or dance lessons? Wine tasting? Art galleries? Amusement parks? Do you wish you could volunteer more? Donate to charity? Leave a legacy? Spend time with a sick relative? Wealth grants you the freedom to do those things.
Money buys experiences that absolutely can make us happy.
What’s My Why?
As I mentioned before, you have to want wealth and financial freedom enough to create and stick to the habits it requires. You need to be intentional and aware of your “why.”
Let me give you an example by telling you about my “why.”
I want the freedom to do what I truly love every day, without having to worry about how I will monetize it.
I want to truly help others, by volunteering my time and money, without having to worry about how I will pay my own bills.
I want to travel the world for weeks or months at a time, to see new places and experience new cultures with those I love. As long as I have a W2 job, I only get 2 weeks of vacation (up to 5 weeks, if I work at the same place the next 40 years!). Not to mention, employers rarely will let you take a full two weeks off at a time, and I’m not sure I could even fully enjoy my time off since I have to worry about the workload that waits for me when I return.
I want to work to achieve and fulfill my own dreams, not someone else’s.
I want to live a simple and balanced life. I don’t expect to ever truly stop working in some way, but I imagine working a few hours a day at something I’m passionate about. I want the freedom to meditate, work out, garden, and spend time with kids in the middle of the day, without having to schedule it or feel guilty about it, or having to “make up the hours later.”
I want to be there for every single event in my kids’ lives. Every musical concert, dance recital, sports games, field trip, celebration, graduation, everything. My parents made a huge effort to attend all of my events growing up (and trust me, I did every activity). These are the memories I cherish, and the time they spent with me influenced me way more than any material item they could have bought me.
All of the above motivates me to work hard and stay the path to financial independence. I review my goals daily (using my daily journal), so that I remember exactly why I’m maximizing my savings. It makes the small sacrifices today worth it, and it guides my choices daily.
When you really stop to think about it, it’s mind-boggling that we spend our one and only life doing anything we don’t love. We get one life, with no do-overs. At the end of my life, I know I will not care about any material items, the cars I drove, or the clothing I wore. I know I will regret it if I do not pursue financial independence and instead waste my life chasing things I don’t really care about. I want to chase freedom—the freedom to choose how to spend my life on the things I really care about.
What’s YOUR Why?
My goal is to help you achieve financial independence.
The very first thing you need to do on your journey to financial independence is come up with your “why.” Physically write it down. I can show you the steps to become wealthy, but I cannot come up with your why. And you won’t take the steps to get wealthy unless you have a meaningful why, and you review it daily. Your why will give you the motivation to spend less than you earn, budget, invest, and consistently stick with these habits.
Answer these questions:
Why do I want to be wealthy?
What are my goals?
What makes me happy?
What would I do if I didn’t need to work for an income?
What would my perfect day look like?
How will wealth help me achieve my goals?
You may have to spend awhile thinking about these things if it’s new to you. It is extremely easy to get absorbed in the idea of exchanging time for money, because that is what has been ingrained in us our entire lives. A wise friend who has achieved financial independence always tells me that money takes on a different meaning once you accumulate a certain amount. It becomes less of a focus in your daily life, and your goals becomes less about money. You no longer have to put a monetary value on your time.
This can be difficult to conceptualize before you have achieved financial freedom, so take time thinking, really thinking, about what your life looks like after money. To a degree, I know I cannot fully predict what I will want once I no longer have to rely on a W2 income to survive, so to some degree I have to trust that I will figure it out. All I know is that I want the freedom and privilege to enter this new way of thinking and achieve the things I really want in life.
Everyone has different “whys” and sources of motivation. Share yours in the comments below. And if you want more help figuring out your why, and learning how to budget, check out my course!