There was an interesting article in the news today about how people who earn £70,000 and over are considered rich.
I think that this is quite an accurate opinion and quite close to reality. Statistically it is definitely nearer the top of the population in one of the wealthiest countries in the world. What is interesting to me though is how many of these rich people are actually poor.
As people’s monthly salaries go up they tend to start spending more and more on luxuries. They get a larger place to live in with a larger mortgage, they get a fancier car, they see their friends wearing nicer clothes so they get nicer clothes. Before they know it their monthly outgoings are so much that they have very little left over at the end of the month. So although their wage is going up, they’re still as poor as they were when they were earning much less.
In other words people don’t tend to live within their means.
I remember when I was young I thought my family was poor (even though my dad was/is a successful doctor). The reason I thought we were poor was because my parents lived within their means. They didn’t buy fancy cars or clothes and now they’re enjoying their lives after some very good investments and ventures.
This is really relevant to anyone thinking of doing any kind of venture or startup.
The reason a lot of people don’t ever start that startup, do that venture or make that investment is not because they’re not smart enough, it’s because they have too many liabilities.
I think this is quite contrary to what most people think – that you have to be special in some way to start a startup and be some kind of super genius. You don’t. All you need to do is find a problem, solve it somehow and create a business around it. But you’ll never even get to try if you have so many liabilities.
Being cognizant of your liabilities – be honest, do you really know how much money goes out of your account every month – and reducing them wherever possible is one of the keys to not only making money, but keeping money. Money management is where people like 50 cent go wrong and lose all their money. It really doesn’t matter how much money you make if you’re spending more than you’re earning.
Even if you don’t ever do a startup, getting rid of liabilities will make your life much more enjoyable and stress free.