How The Wealth Building Process Affects Your Lifestyle

Are you ready for the wealth building process that will lead you to financial freedom and enjoy an early retirement ? It is a discipline through which you must be prepared to acquire skills at investing, financial planning, tax planning and most of all changing your mindset.

Many people prefer the trappings and illusion of wealth over the freedom of actual wealth and hide under the temporally comfort of their white collar or blue collar careers. They want to look wealthy rather than be wealthy.

Don’t believe it?

Just look around you and see how many people are in debt compared to how many people are wealthy. Most people choose lifestyle over financial freedom and violate the first principle in the wealth building equation: accumulate bankable assets.

They spend instead.

The problem is you will never become rich by spending money. You must control your spending so that your lifestyle lags behind your income. This will create available capital for your investment activities.

If you know how to spend less than you get, you have the philosopher’s stone.
– Benjamin Franklin

The Wealth Building Process

James Barnash (SGL Financial), former president and chairman for the Financial Planning Association, says” living within your means is critical if you’re serious about retiring early. The finer things in life can be fun to have, and many people aspire to them, but too much indulgence will backfire.

Barnash describes people he knows who have very little in the way of savings and investments, yet have spent large sums of money on maintaining a luxurious lifestyle. “They have four or five cars, they own big homes and take fancy vacations,” he comments. “But they’ll have to work forever because they don’t have any money put aside.”

However, he’s also seen people who have lived very modestly on limited incomes. Now they’ve retired early and are “happy and enjoying life in retirement

The life cycle of wealth building dictates that the most important factor early in your wealth cycle is your rate of savings or asset accumulation.

At some point in the wealth building process, you cross a threshold where the return on your assets is more significant than how much you add to them, but that is much later in the equation.

However, in the early stages you must build the assets so that you have something to grow. For most people that starting point is to save money.

Whether you own your business or work as an employee, you must think of each dollar as a little soldier on the battlefield of your wealth. Every time you spend that dollar on consumption instead of investment, the soldier dies.

But when the soldier is invested he produces new soldiers and creates an ever growing army working for your financial security and a happy early retirement. The bigger your army the greater your financial security.

According to the The Millionaire Next Door by Stanley and Danko, frugality and disciplined savings is the cornerstone of a financial plan. Self-made millionaires share a common value for thrift and discipline with their finances through budgeting, controlling expenses, and saving a portion of their income.

Judging by results, you would be wise to follow their lead.

Consumer debt is the antithesis of wealth and should be avoided. It causes enslavement to the system in the name of false prosperity.

If financial freedom during retirement is your objective then your practice must be to earn interest and compound your assets — not pay interest and compound your debt.

The only debt that is acceptable is to buy productive assets. A home mortgage, positive cash flow real estate, and certain business debt all qualify. Debt for consumption does not qualify.

The rule is simple for principle #1 in our wealth building process: save money and build assets. The sooner you begin and the more you save each month, the sooner you will retire early and wealthy

Every day you are making choices between lifestyle now and wealth accumulation for tomorrow. You can either invest those soldiers for freedom tomorrow or slaughter them for goodies today.

This rule is simple to understand, but hard to live. Are you ready to walk the talk?

Lets read about the next building block on why you need financial education

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