The Secret to Creating Lifetime Wealth (Part 1)
Image sourced by Tyler Franta @tfrants
Welcome back!
This blog post covers one of the most important and fundamental financial concepts and money concepts about building lifetime wealth; what wealth is; and what wealth can do for you.
The language might seem to be a bit winding – perhaps a bit of stream of consciousness in one or two places – but go with me on this Please.
I want you to think wealth, prosperity and abundance. Let’s get to it!
If you’re just joining this blog post series, click here to see Part 2, Part 3, Part 4 and Part 5.
If you are proactive with your finances, you may have read about some of these concepts, but probably not at this level of detail or in the way we present them.
Maybe even consider reading this blog post twice. I have.
This week, you’ll find a fair amount of math here, but I have tried my best to lay it out clearly and explain it in bite-size chunks.
Investopedia.com defines wealth as “measuring the value of all the assets that a person owns.”
Investopedia.com follows that by saying that wealth is essentially your net worth.
Net worth means the fair market value of your assets minus the fair market value of your liabilities. In other words, how much money you have left after you pay off all your debts and other obligations.
Assets mean items that have value that you own.
Liabilities means how much money you owe to third parties – banks, credit cards, home mortgage, automobile loans, personal loans, student loans, etc.
We’ll be covering net worth in greater detail in another blog post.
But in this edition of Budget and Grow Rich®, we’re talking about how to be wealthy for your entire life; Your lifetime income – the fundamentals behind how much money we have once we retire; and how much money we have to live on and support ourselves and our family.
The financial media provides wealth-building tips and investment recommendations galore – enough to spin your head.
And financial advisors advise their clients on portfolio construction, which includes a risk assessment – how much risk you can stomach, your risk tolerance. And a mix of assets – your asset allocation.
Asset allocation means the percentage of your portfolio that you invest in each investment/asset class. Examples include common stocks, fixed income, money market accounts, real estate, gold bullion, alternative investments (ALTS. Which include hedge funds, private equity funds and other investments), etc.
But it’s Our Responsibility, Job #1, to decipher the spaghetti; make heads or tails out of it and make the best financial decisions optimal financial decisions for ourselves and our family.
I think where many people fall short is:
Not Diving into the nuts and bolts of what it takes to create great wealth given Your particular financial circumstances and financial position;
Not controlling your expenses and not controlling your spending;
Not reducing expenses in the event your income declines;
Increasing spending – increasing your lifestyle (and cost of living) when you get a salary increase or a merit bonus; and,
Not analyzing your likely lifetime income and then designing your lifestyle and organizing your living expenses to fit comfortably within your income.
Not figuring out what it takes get from A to Z so you enjoy lifetime wealth.
I know!
When I was going through the divorce back in 2006-2007, I was Lost, Down and Grasping at Straws. I let my personal budget and spending go haywire. But thankfully, I recovered and am way better off – financial and more importantly personally.
Turning back to my Dad, G-d bless him, turned 92 on St. Patrick’s Day. Happy Birthday Joey V.
My brother who’s a doctor thinks that Dad will be above ground for another four or five years or so.
97. . .
Hopefully my dear old brother is right or has underestimated. And for what it’s worth [albeit as an accounting and finance guy], I think that five years seems reasonable. Dad’s sister Peggy died last year at 96; although in the last few years, her quality of life was terrible.
And my Mom unfortunately passed away of Cancer at 76. Young. Too young!
Which begs the question of life expectancy; or “How long will I live?” and more important. . .
“How long will you live?”
“What’s your life expectancy?”
That’s the Big Question or as the once popular TV Show The $64,000 Question was named, that we must ponder.
And Plan Accordingly.
And answer the follow-on question, “How much money do You need to support yourself and your family for the rest of your life?”
And “How much money do you have to save and accumulate to Avoid outliving your money?”
While I don’t know when my last day will be, hopefully it’s closer to 92 or 95 than 76. So long as I’m healthy and functioning at a high level.
Either way, we Must Plan so that we can go the distance, however long that may be.
In Part 2, we discuss investable capital and the concept of generating income on your investments – return on investment.
Let’s starting thinking wealth, prosperity and abundance and design a plan to help us build lifetime wealth. Right now!
See you next week.
Arthur V.
P.S. To Create More Free Cash, Save More Money on Groceries Every Day – click here.
To grab the other blog posts in this special Budget and Grow Rich® wealth-building series, click here to see Part 2, Part 3, Part 4 and Part 5.
Disclaimer: OH and Please Remember, we are Not attorneys or financial advisors and are Not providing any specific financial, tax or legal advice here. Be sure to consult your own professional advisors to get sound professional advice that’s specific to your financial and personal circumstances!
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