Many people hope to earn a six-figure salary, but the majority will not be able to do so throughout their working lives.
The median annual earnings for full-time employees in the UK in 2020 was £31,460 which is a far cry from six-figure
Is it therefore impossible to accumulate wealth? Or be financially independent? NO, NO, NO!
It is possible to accumulate wealth even on a lower income because it is not about how much money you make. What matters is how much money you keep
What comes to mind when you think of wealth? Is it a mansion, designer clothes, fast cars, or a successful career?
I don’t believe wealth is only about what we can see; rather, wealth is an all-encompassing state of wellness, which includes both the tangible and intangible.
Many define wealth as the value of one’s net worth. This is because numbers help keep things in perspective and are simple to calculate.
We will stick to this standard even though wealth is much more than that.
Many people who desire to make six figures in reality only want to live the celebrity lifestyles which isn’t bad in itself but don’t live the celebrity life today at the expense of your future self.
Financial wealth has nothing to do with your income and everything to do with your net worth.
Living paycheck to paycheck is not a wealthy way of life.
The internet is littered with stories of athletes who made a fortune during their careers only to go bankrupt a few years later as a result of their lifestyle
Trust me, the process I’ll share below isn’t glamorous, but it is possible to build wealth regardless of your income.
Building wealth requires a shift in mindset as well as the adoption of good habits. This is how you do it:
This is your starting point and your north star; it inspires you and keeps everything in perspective;
I am asking you to dream
What is your wealthy life and what does it mean to you?
But don’t stop there instead craft a plan to achieve it.
For example, in your wealthy life, you are working from home 3 times a week but you need to learn a new skill to make that transition
Then, based on the answers to those questions, take the steps to gain the desired skill.
Bringing your goals and dreams to life is a process.
Begin by breaking down your goals into milestones, then identify the activities, tasks, habits, and systems required to achieve each milestone.
Putting systems in place will greatly increase the likelihood of getting to your desired destination
For example, learning the new skill may require you to attend an online course for one hour every evening by 7 pm, which may mean no Netflix
Your cash flow is the amount of money that comes in and goes out, and a budget helps you manage it.
Many people don’t budget consistently and if this is you read our post on how to budget in 6 simple steps and the different types of budget
Your net worth is the difference between your assets (everything of value that can be converted to cash) and your liabilities (debt you owe).
You should constantly keep track of and increase your net worth.
For example, suppose you bought a house for £200,000 with a 10% down payment of £20,000 and a mortgage of £180,000.
The house is both a source of income and a source of debt. The house is worth £200,000 but you borrowed £180,000, thus your net worth is £20,000.
The goal is to have a positive net worth
Other examples of assets are businesses (through stocks, starting a business or side hustle), rental property, investment accounts, cash etc
You also want to pay down your debt to increase the gap between your assets and liabilities.
So, while establishing a budget to manage your cash flow is an absolute must, the goal should be to improve your net worth if you want to build wealth.
That implies you must set aside a particular amount of your monthly income to invest; the larger the percentage, the faster your net worth will grow.
Lifestyle inflation occurs when your income and expenses rise at the same rate.
Increasing your income is very effective in building wealth only if you are beating lifestyle inflation, this means tracking and being intentional with your expenses
The income of most people will rise over the course of their working lives through a raise, promotion, change of jobs, side hustle, a second job etc
The trick is to ensure that your costs do not increase at the same rate as your income.
Living on one income is a powerful way for couples and people with multiple incomes to overcome lifestyle inflation
Unfortunately, there is no way around doing the work of building wealth
Everyone reading this will be at different places in their life and that means we all have different starting points
Remember it’s unwise to compare yourself to someone else.
Instead, compare yourself to your previous self, and that’s all that matters.
Peace!!
